Workers’ Comp Insurer Proposes 5% Rate Drop

An influential government-backed insurer that sells workers’ compensation insurance to thousands of California business owners proposed a 5% rate decrease Monday.

The announcement by State Compensation Insurance Fund is significant because with 268,000 policyholders, State Fund has the ability to influence rates paid by all employers. The company said the reduction represented its third consecutive rate decrease since January, translating into an average decrease of 12% for employers renewing during the first half of next year.

About 18 insurers have submitted rate filings with Insurance Commissioner John Garamendi, ranging from a 10.4% decrease to a 6.5% rate increase. Nearly a dozen insurers, however, have proposed premium reductions of 2.2%.

That reflects the latest recommendation from Garamendi, who has reduced the state’s advisory rate -- which insurers are not required to follow -- by 22.6% since last year. By comparison, the influential Workers Compensation Insurance Ratings Bureau suggested employers pay 3.5% more next year.

Garamendi described the latest reduction by State Fund, a company with 55% of the market, as “good, but not enough.”

“With greater efficiencies and planning, State Fund could realize further savings that more closely reflect the more than 22% reduction in loss costs that has occurred within the system since July 2003,” Garamendi said.

State Fund spokesman Jim Zelinski said his firm was subject to the same cost pressures as other insurance carriers.

“We understand California employers need further rate relief,” Zelinski said. “This is an attempt to give them some relief and for us to charge enough” to cover the costs of claims.

“It’s certainly a step in the right direction,” said Charles Bacchi, a lobbyist with the California Chamber of Commerce, of the State Fund announcement. “We think it’s proof the reforms are working, but there’s still more to be done.”

David Schwartz, president of the California Applicants’ Attorneys Assn., described the rate decrease as insufficient, suggesting premium reductions should correspond with proposals to slash benefits for permanently disabled workers.

“For employers who have had their rates go up 100%, 200%, 300% it’s absurd to talk about a 5% decrease,” Schwartz said. “We’ve proposed a 24% decrease given the savings the carriers have had based on new bills that have passed.”