AIA Says No to Calif. Rate Regulation

April 16, 2004

The American Insurance Association (AIA) on Thursday issued a statement in response to the introduction of ABX4 16. This measure would reportedly impose a new rate regulation scheme on workers’ compensation carriers in California.

According to Nicole Mahrt, director of Public Affairs for AIA’s Western Region:

“Rate regulation is not the solution to the many problems plaguing California’s workers’ compensation system. Additional regulatory hurdles will not lower costs in the system; nor will they help self-insured businesses and non-profit entities. The private insurance market has shrunk over the past several years to where it comprises only 20 percent of the total marketplace, leaving the State Compensation Insurance Fund to cover over 50 percent of California businesses. Regulation of the insurance market will not attract new private capital. It will not create a competitive marketplace.

“What would such regulation of private carriers be? A giant step in the wrong direction for California workers. It would be a big mistake to create such an artificial rate-setting mechanism, which gives carriers no flexibility to respond to unpredictable cost drivers in the system. Flexibility and predictability are the two ingredients insurers need to accurately predict loss and set appropriate rates. Gov. Schwarzenegger and legislators have worked hard to find a comprehensive solution to California’s workers’ compensation problems. SB 899, which was approved by the conference committee early this morning, tackles the real problem in the system – the cost drivers.”

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