Calif. Association Urges Governor to Sign Workers Comp Bill

September 13, 2007

The Association of California Insurance Companies (ACIC) is urging Gov. Arnold Schwarzenegger to sign into law legislation that it said could encourage expansion of the workers’ compensation insurance market in California and, thus, provide greater insurance choices for businesses.

ACIC President Sam Sorich said the bill, SB 316 by Sen. Leland Yee, D-San Francisco, “would foster greater competition among insurers by eliminating an unnecessary and duplicative reserve requirement. The requirement, which was created nearly 40 years ago, has been superseded by modern laws that more effectively regulate insurer solvency. Eliminating the requirement will release capital so insurers can write more business in California,” he said.

Existing law requires insurers to maintain certain minimum
reserves for outstanding losses and loss expenses for various
coverages included in the lines of business described in the annual
statement. SB 316 would delete workers’ compensation insurance from that requirement.

Additionally,the bill would require the Commission on Health and Safety and Workers’ Compensation to examine the causes of the
number of insolvencies among workers’ compensation insurers within
the past 10 years. It would require that by June 1, 2009, the report
be published on its Internet Web site, and the Legislature and
governor be informed of its availability. Half of the costs for the report would be paid for by the Workers’ Compensation Administration Revolving Fund.

Sorich stressed that the bill would not jeopardize benefits for injured workers. The insurance commissioner will continue to have the authority to make certain that insurance company reserves are adequate to pay claims.

“This bill helps California’s workers compensation system. It allows insurers to shed an unnecessary reserve requirement and, therefore, have greater flexibility for competing in the marketplace. Injured workers, meanwhile, will continue to receive their workers compensation benefits. And because SB 316 fosters greater competition, businesses are likely to have more choices in obtaining workers compensation insurance to protect their workers,” Sorich said.

If approved by the governor, the bill will become effective Jan. 1, 2008.

Source: ACIC, California Legislature

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