Calif. SCIF: 7% Rate Decrease Effective July 1

June 7, 2004

State Compensation Insurance Fund announced a seven percent rate decrease on new and renewal policies with an effective date on or after July 1, 2004. This decrease is a result of the cost saving reforms adopted by the Governor and Legislature earlier this year. This follows an average 2.9 percent rate decrease that was effective Jan. 1, 2004.

“Policyholders with July through December renewal dates will see an average decrease close to 10 percent from their expiring policies,” said State Fund President Dianne C. Oki. Oki added, “Policyholders will also be impacted by changes in individual class experience and by updated policyholder experience modifications, so some policyholders will see less, while others will see more than the average decrease.”

State Fund Executive Vice President Jim Neary said, “This rate decision prudently balances the needs of State Fund’s policyholders for immediate rate relief, the uncertainties of estimating some reform savings, and the need for State Fund to further strengthen its surplus position. Perhaps the best news is the potential for further rate reductions going forward. Some elements of reform that are unquantifiable upfront will bring down rates as savings emerge in experience, while other elements of reform such as changes in the permanent disability rating system, will be reflected in rates when they take effect next year.”

Oki stated, “To fulfill its mission, State Fund must maintain the financial strength to meet our obligations to California employers and injured workers. This rate filing achieves this objective.”

In the last several years, State Fund has experienced unprecedented growth — increasing pressure on State Fund’s reserves and surplus — due to the most dramatic marketplace contraction in the system’s 90-year history.

“State Fund will continue to review its experience and cost savings as a result of the new workers’ compensation laws,” Oki said. “We expect further rate reductions based on demonstrated savings in 2005.”

California Insurance Commissioner John Garamendi released the following statement in regards to the rate decrease: “This is disappointing, but I understand the historical financial issues that the State Compensation Insurance Fund faces. Nevertheless, as required by law, my Department will analyze this filing to determine whether all of the available savings are indeed being passed on to employers.

“I once again call on the Governor to turn his attention to the management and operational problems of State Fund. Through his appointment of the Board of Directors he has the power to remove obstacles that would prevent savings from being passed on,” Garamendi said.

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