AIA Comments on Calif. Workers’ Comp Rate Decrease; Bill to Regulate Rates

June 2, 2005

A day after the California Senate gave the go-ahead for a bill to regulate workers’ compensation rates, Insurance Commissioner John Garamendi (D) has recommended that insurers base premiums on a decreased pure premium rate of 18 percent, the American Insurance Association (AIA) reported.

“We are glad to see Commissioner Garamendi acknowledge that the historic workers’ compensation reforms are working,” says Ken Gibson, AIA vice president, western region. “California’s workers’ compensation market has gone from double-digit rate increases to double-digit rate decreases, which is good news for employers and workers. Insurers will consider the pure premium rate and decide what rating plans to file based on the specific needs of their book of business.”

“While trying to determine how the commissioner derives his number is always an adventure, this 18 percent decrease is not completely unreasonable,” said Gibson. “Some companies will file higher decreases and some will have to file lower decreases – it all depends on how their losses are developing,” he explained.

“The fact remains that since the reforms were enacted last year, four consecutive rate decreases have been recommended. After a decade of red ink and unpredictability, California’s marketplace is becoming more competitive and stable. These decreases are taking place despite the uncertainty of a rate regulation bill, multiple lawsuits and threats of changing the permanent disability regulations,” Gibson said.

In other workers’ compensation developments, SB 46, a bill which will allow a panel of voter-elected politicians to decide workers’ compensation rates, was approved by the California Senate on Tuesday by a vote of 22 to 12. The bill will now be sent to the Assembly for its consideration.

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