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California Insurance Commissioner John
Garamendi has recommended a 15.3 percent
decrease in the state's workers' compensation
pure premium rates. This is his fifth
consecutive decrease, which will bring the
cumulative recommended cuts to 46.2 percent.
In announcing the move, the Commissioner
renewed his call for insurers to pass along
savings more quickly to employers. He noted
while he had called for cumulative decreases
of 36.5 percent prior to Thursday, insurance
companies had lowered rates by only 26.7
percent.
"This does not compute," the
Commissioner said. "Insurance companies
are currently paying just 38.5 cents of every
premium dollar they collect for the care of
injured workers. It's obvious that the savings
are there -- insurers simply need to pass them
on."
Sam Sorich, president of the Association of
California Insurance Companies, said the
industry loss ratio calculated by the
Commissioner "is misleading because it is
merely a snapshot in time. It does not
consider rate decreases that went into effect
July 1 of this year. New rate changes are
taking into account the lower costs that
recent reforms have achieved."
The Commissioner did reiterate that the
major reforms brought about by AB 227 and SB
228 are working. Those pieces of legislation
helped halt what he called an
"up-escalator" of rising workers'
compensation costs that were choking
businesses and the state's economy.
"The turnaround provided by this
legislation is significant and great news for
our state's economic health," Garamendi
said. "Insurers should recognize that the
additional savings now available could be the
fuel that injects even more life into our
recovering economy."
Sorich said the rate cuts are continuing to
reduce costs to employers. For instance, in
July 2003, the average rate paid by employers
was $6.50 per $100 of payroll. By January
2005, the rate had dropped to $5.26 per $100
of payroll, he said.
During his announcement, the Commissioner
noted that much of the reforms are still being
implemented, as well as additional reforms
brought about by SB 899. He cautioned that as
they are more fully implemented, some changes
may result that slow the pace of future
decreases in the pure premium rate.
The Commissioner also expressed concern
about testimony he has received regarding the
savings resulting from changes to the workers'
compensation permanent disability rating
schedule. "The decrease in permanent
disability ratings from the pre-2005 rating
schedule to the new schedule are almost
half," he said. "I urge the
legislature and the Governor to quickly
reexamine this issue and have corrective
action taken if necessary."
(article
taken from Insurance Journal)
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