ACIC President Responds to Calif. Commissioner’s Comp Rate Cut

June 1, 2005

The Association of California Insurance Companies’ President Sam Sorich made the following statement in response to California Insurance Commissioner’s recommended workers’ compensation
rate reduction of 18 percent.

Although they produced different recommendations, the insurance commissioner and the Workers Compensation Insurance Rating Bureau obviously agree on one thing: The reforms enacted by the Legislature and governor over the past 18 months are working.

There is clear evidence that the reforms have resulted in a steady decrease in workers compensation costs and rates since the first of the reforms went into effect. We believe the costs will continue to decrease as long as the reforms are allowed to be fully implemented without interference through the legal, regulatory or legislative arenas.

The rating bureau recently recommended another 13.8 percent decrease in rates, effective next month. This recommendation is sound and reflects, through actuarial evidence, the best available estimate of the reforms’ impact so far.

At this point, we are not certain how the commissioner has reached the mathematical conclusions that resulted in his rate recommendation. However, ACIC will be reviewing the commissioner’s analysis.

In either case, it is important to note that what the bureau and commissioner put forward are only recommendations. The rate changes implemented by each company will vary due to the insurer’s customer base. And those customers represent different levels of risk.

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