California Insurance Commissioner John Garamendi announced on Tuesday that received workers’ compensation rate filings illustrate a downward trend, but still fall short of his pure premium rate advisory of -20.9 percent issued on May 28, 2004.
Incorporating all the filings received by the California Department of Insurance (CDI) as of July 12, 2004, the cumulative, average, premium weighted, overall rate reduction for all companies is -10.38 percent since the 2003/2004 reforms. If State Compensation Insurance Fund (SCIF) is excluded from the figures, the rate reduction would have been -11.17 percent. The difference of nearly 0.8 percent between the two figures represents approximately $115 million that would have stayed with California businesses.
“Workers’ compensation rates are definitely on the down escalator, but the escalator needs to speed up,” Garamendi said. “Greater savings are possible, especially from the State Compensation Insurance Fund. Their -9.7 percent reduction is far less than the two national companies, Republic Indemnity and Liberty Mutual.”
Among the top ten marketshare groups, the Republic Indemnity companies filed an average 20.48 percent rate reduction and the Liberty Mutual companies filed an average -17.54 percent rate reduction.
“I commend these industry vanguards for expressing their belief in the 2003 and 2004 reforms by giving rate relief to businesses as soon as possible. They are helping California’s economy now, rather than hedging their bets against it,” Garamendi added. “At the end of the day, California must have a healthier, more responsive SCIF if we are to continue turning the corner on this issue.”
Garamendi noted that SCIF commands 53.03 percent of the workers’ comp marketplace. By comparison, Republic Indemnity and Liberty Mutual companies represent a combined 4.04 percent of the market.
“I remain committed to working with the newly appointed, reform-minded board of directors to lower SCIF’s rates while preserving its solvency,” Garamendi said.
Last week, CDI issued a statutorily mandated report which found that if SCIF were to adopt certain underwriting practice and rating plan recommendations contained in the report, redirected its investment portfolio, and reduced maximum commission rates, overall net savings of -6.7 percent could be realized. Those savings would be in addition to the -9.7 percent in reductions SCIF already filed during 2004.
CDI expects to issue a report in August 2004 on SCIF’s loss reserves. CDI also recommended the California Legislature and Governor order an operational review of SCIF that includes claims handling.
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