Calif. State Fund Unveils 2004 Report

September 8, 2005

California’s State Compensation Insurance Fund (SCIF) recently released its 2004 report. The following is a message from SCIF President J.C. Tudor.

“Each year, at annual report time, State Fund’s President has the opportunity to call attention to significant developments in workers’ compensation or share items of interest about our organization. Looking back on prior president’s letters that have prefaced our annual reports, I noticed that some of the topics covered were ephemeral even though they seemed very important at the time. The milestones of 2004 were hardly transitory events. That’s because 2004 was a watershed year for California workers’ compensation system and for the state’s economy.

“The most significant development by far, was the passage of SB 899, a key component of workers’ compensation reform legislation signed by Governor Schwarzenegger on April 19, 2004. Reform efforts have included AB 749, passed three years ago, followed by AB 227 and SB 228, passed two years ago and culminating in 2004’s SB 899. This last bill was the capstone of a series of events which affected every major stakeholder in the workers’ compensation system. Concerns of labor, industry, insurers, employers, medical providers and regulators were all brought together and SB 899 gave hope to cash-strapped businesses reeling from skyrocketing workers’ compensation costs. By building in protections for injured workers and adopting nationally recognized medical guidelines, the reform effort restored credibility to a damaged and widely distrusted system.

“What does this mean to California employers? It means reform is here, its direction is clear and it is working. It also means an end to the upward premium spiral that made workers’ compensation coverage the number one cost issue for employers.

“Workers’ compensation rates declined as early as January of 2004, and decreases have continued. State Fund has reduced average rates a cumulative 26.2% over that period. These decreases take time to work through the system. Policy renewal dates, the loss experience of individual classifications as well as employer loss experience will all have an impact on premiums. But the decreases already in place, or in the pipeline, will ultimately benefit State Fund’s insured employers.

“Reform also played an important role in encouraging carriers to return to the marketplace. This means more choices for employers, and will encourage a greater emphasis on superior service, as well as lower prices. Carriers are once again competing for your business, and that’s good news.

“Finally, reform legislation and the revitalized marketplace will have a direct impact on State Fund. We grew very rapidly during a four-year period which experienced the greatest instability ever witnessed in California’s workers’ compensation marketplace. More than two-dozen workers’ compensation carriers failed and others withdrew from the marketplace, leaving almost a third of California’s insured employers without a market for coverage. Thousands of these employers turned to State Fund.

“This unprecedented growth was difficult for State Fund. Finding and training qualified staff, ‘ramping up’ new systems, and coping with drastically increased volume, tested us as thoroughly as any past crisis we’ve encountered. I’m pleased to say those days are now behind us. State Fund’s professional, dedicated employees gave everything they had during this period. They succeeded in providing coverage to employers and benefits to injured workers without interruption. I commend them for their loyalty, skill and determination. They are the finest group of insurance professionals that I have ever had the pleasure to work with in my more than 30 years of workers’ compensation experience.

“State Fund’s period of rapid growth has ended. Competition for your workers’ compensation business is back, and we at State Fund must adjust. Our continued success dictates that we need to create a lean and even more efficient State Fund. Our organization must do more with less resources. We have implemented several initiatives in the areas of organizational structure and electronic systems to make these goals possible. I can assure that you will all see the benefits of these changes in the coming months and years.

“In closing, I would like to thank all of you for doing business with State Fund. My commitment to you is the promise of a responsive and increasingly efficient organization. We will not lose sight of our important mission or of our responsibility to California employers and their injured workers.”

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