Calif. Gov. Signs Workers’ Comp Reform Bill

October 12, 2007

California Gov. Arnold Schwarzenegger has signed legislation authored by Sen. Leland Yee, D-San Francisco/San Mateo, that is expected to lower workers’ compensation rates for small businesses and increase competition among insurance companies.

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.

“This legislation will allow more policies to be issued and small insurers to enter the market, resulting in savings for small businesses and more workers getting the coverage they need,” Sen. Yee said.

Furthermore, “the study component of the bill will allow us to pinpoint and document the causes of previous insolvencies in order to make sure that the same mistakes are not made in the future,” Yee added.

Sam Sorich, president of the Association of California Insurance Companies, 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, he said.

The bill will take effect on Jan. 1, 2008.

Sources: Office of the Governor, Sen. Leland Yee, ACIC

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