California Workers’ Comp Rate Regulation Bill Moves Through Committee

April 13, 2005

A measure approved April 13 by the California Senate Industrial Relations Committee will create an artificial pricing scheme and send the wrong message to workers’ compensation insurers considering investing new capital in the California marketplace, according to the American Insurance Association.

“Rate regulation is a diversionary tactic designed to deflect attention away from the fact that the historic reforms enacted last year are working and California’s system is moving in the right direction,” said Ken Gibson, AIA vice president, western region. “We have gone from automatic double-digit rate increases to double-digit rate decreases. The reforms are taking hold and predictability and competition are returning to the system. On average, employers are seeing rates go down 16 percent. Now is not the time to politicize the rate-making process.”

SB 46, authored by Sen. Richard Alarcon (D), creates a three-member Commission on Workers’ Compensation Rate Regulation. The three members of the commission would be the governor, the insurance commissioner, and the attorney general or their designees. The commission would be responsible for setting the pure premium rate, adopting a uniform rating plan and approving loss and expense multipliers used by insurers.

“Last year’s SB 899 mandated that a study be completed to evaluate the reform legislation’s impact on rates,” Gibson said. “Any action taken before this study is completed is premature and unnecessary.”

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