California Assembly Member Anthony Portantino, 44th District, has proposed a bill aimed to level the playing field for brokers who help to secure workers’ compensation insurance from the State Compensation Insurance Fund.
In AB 974, Portantino said State Fund’s practice of charging a rate with a price differential because the policyholder purchased the policy through a broker is unfairly discriminatory.
“Existing law regulates the rate that may be charged on workers’ compensation insurance and requires every workers’ compensation insurer to adhere to a uniform experience rating plan filed with the Insurance Commissioner by a rating organization designated by the commissioner and subject to his or her disapproval. Existing law requires that a rate be adequate to cover an insurer’s losses and expenses, not tend to create a monopoly, and not be unfairly discriminatory. Under existing law, rates are unfairly discriminatory if, after allowing for practical limitations, price differentials fail to reflect equitably the difference in expected losses and expenses,” the bill text states.
State Fund spokeswoman Jennifer Vargen, however, said State Fund “doesn’t not believe there is an issue” with its price differential.
“We believe brokers provide tremendous value to California employers and compensate them and pay commissions for the work that they do, with a very few exceptions for a few classifications,” she said. “But we have a mission to be here for all California employers, and in particular some very small employers cannot get broker representation, and so we have a modest 3 percent price differential that recognizes that they are not getting the full services that brokers offer. We believe that makes the distribution system more equitable. Because we have a mandate to be there for all California employers and have a dual distribution system, we believe this modest differential provides more equity between the distribution channels.”
Vargen said State’s Fund’s largest source of direct referrals are brokers, “so for most part these clients are not served by broker community primarily because they are too small.”
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