Reaffirming his instruction that it remains California’s “insurer of last resort,” Commissioner John Garamendi directed the State Compensation Insurance Fund (State Fund) to ease access requirements for small employers who pay $25,000 or less in estimated annual premium (EAP) seeking workers’ compensation coverage.
“Small employers have few options for coverage in the current market and should not be forced to undertake laborious and time-consuming processes before being allowed to apply at State Fund,” said Garamendi. “Therefore, I am directing State Fund management to eliminate its requirement for those small employers who are not represented by a broker to provide proof of declination from three other carriers before submitting an application.”
Garamendi also directed State Fund to amend its review process for other new business applications, including larger employers with EAP of more than $25,000. Written and signed declinations from other insurers will no longer be required; instead, both employers and brokers will be allowed to file declarations with State Fund documenting their diligent, unsuccessful searches for coverage from the private market.
In March 2003, Garamendi directed the troubled State Fund to devise a business plan to address its serious financial problems. The organization has experienced exponential growth in recent years because of a lack of capacity in the market. It now writes more than 50 percent of all workers’ comp policies in California. The approved plan calls for State Fund to address an urgent need to reduce premium writings.
As part of its plan, State Fund initially instituted an across the board “proof of declination” policy to encourage brokers, agents and businesses to seek coverage in the private market. However, a subsequent examination and analysis by Department of Insurance staff found that State Fund could more effectively address its premium volume problem by shedding large companies that have the ability to acquire coverage elsewhere.
“As a result of today’s directive, small employers who are not represented by brokers will be given greater and more direct access to State Fund coverage,” said Garamendi. “And, State Fund will continue to provide coverage for those employers who cannot find it elsewhere.”
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