Calif. State Fund Files an Average 14% Rate Decrease
West News • June 1, 2005
State Compensation Insurance Fund has filed an average collectible rate decrease of 14 percent on new and renewal workers' compensation policies with an effective date on or after July 1, 2005. ...
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Subject: Rate Redcutions/Commission Affect
Posted On: June 2, 2005, 2:00 pm CDT
Posted By: Chris Clark
Comment:
Every Broker or Agent has been painfully aware of the adverse affect on our clients from the out-of-control W/C system over the past many years. The rate reductions are a welcome sight as are the new carriers willing to write W/C. So, the reform is working for the business owners and apparently the carriers.
What is not working is the other side of the equation. For professional brokers who add value by helping clients create and manage workplace safety; manage claims; review and fix audits; the result of the reform is now almost unaffordable. It seems our industry attacks problems in segments without considering the affect on all parties. Insurance companies are now reaping the benefits; business owners are now paying less and getting discounts for safety ( which they should). However, the net affect on a broker or agent is that a new standard has been set for commissions largely by what the State Fund pays- 5.5%- and that is now being applied to lower rates. So it's a double-whammy for the broker or agent and yet he still has the same expense factors. This seems to be of no concern to anyone in the circle of providing the product. Garamendi seems to think agents and brokers are overpaid and provide no value and pressured SCIF to reduce commissions which set the new standard. Unfortunately, as this turns full circle, less broker involvement in safety in the workplace will generate more claims, And the beat goes on. If you do the math, commissions were reduced from 10% to 5.5% which is a 45% reduction. Rates are now dropping by all accounts at least 15% so the net affect to brokers and agents is that they are taking about a 64% hit in actual, spendable income and yet still being asked to do the same work. Something is very wrong with a system that would support this philosophy. It's akin to raising road taxes to build roads; building them or using the money for some other purpose; and never repealing the tax.
Where are the Industry Leaders on this and why do we not hear a hue and cry from the broker/agent community. Are we afraid to ask that we be paid for what we do? Sure, you may be able to add broker fees but in reality it is not done very often because there is always someone who will quote without them and not provide the value-add. How about a fair commission rate so we can be part of the overall solution? How about an awareness campaign to enlighten Garamendi as to what a good broker does to earn his commission and why that is good for the overall system?
West News 
Subject: Rate Redcutions/Commission Affect
What is not working is the other side of the equation. For professional brokers who add value by helping clients create and manage workplace safety; manage claims; review and fix audits; the result of the reform is now almost unaffordable. It seems our industry attacks problems in segments without considering the affect on all parties. Insurance companies are now reaping the benefits; business owners are now paying less and getting discounts for safety ( which they should). However, the net affect on a broker or agent is that a new standard has been set for commissions largely by what the State Fund pays- 5.5%- and that is now being applied to lower rates. So it's a double-whammy for the broker or agent and yet he still has the same expense factors. This seems to be of no concern to anyone in the circle of providing the product. Garamendi seems to think agents and brokers are overpaid and provide no value and pressured SCIF to reduce commissions which set the new standard. Unfortunately, as this turns full circle, less broker involvement in safety in the workplace will generate more claims, And the beat goes on. If you do the math, commissions were reduced from 10% to 5.5% which is a 45% reduction. Rates are now dropping by all accounts at least 15% so the net affect to brokers and agents is that they are taking about a 64% hit in actual, spendable income and yet still being asked to do the same work. Something is very wrong with a system that would support this philosophy. It's akin to raising road taxes to build roads; building them or using the money for some other purpose; and never repealing the tax.
Where are the Industry Leaders on this and why do we not hear a hue and cry from the broker/agent community. Are we afraid to ask that we be paid for what we do? Sure, you may be able to add broker fees but in reality it is not done very often because there is always someone who will quote without them and not provide the value-add. How about a fair commission rate so we can be part of the overall solution? How about an awareness campaign to enlighten Garamendi as to what a good broker does to earn his commission and why that is good for the overall system?