California Gov. Arnold Schwarzenegger has signed legislation 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 deletes workers’ compensation insurance from that requirement.
The new bill, which takes effect Jan. 1, will require the Commission on Health and Safety and Workers’ Compensation to examine the causes of the number of insolvencies among workers’ comp insurers within the past 10 years. By June 1, 2009, the report must be published on its Web site, and the Legislature and governor be informed of its availability. Half of the costs for the report will 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,” the bill’s author, Sen. Leland Yee, said. He added that “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.”
Sam Sorich, president of the Association of California Insurance Companies, said the bill should 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.
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