Meanwhile, private companies continued to file rate reductions that were far smaller than the advisory rate put forward by the California Department of Insurance.

Mr. Contreras, referring to the state fund rate level decrease said, "Sure, you will see some benefits even if it's just a seven percent drop across the board, but I think that after we've taken a 300 percent increase in workers' comp premium rates for the last three years, a single-digit percentage decrease isn't going to change our prospects much."

The association, based in Los Angeles, has some 200,000 member companies in the state.

The seven percent average rate cut was announced last Friday by the California's State Compensation Insurance Fund. SCIP, the state's largest workers' comp insurance provider, serves the residual market and commands more than 55 percent of the market share.

The reduction would apply to new or renewal policies starting July 1. This follows an average 2.9 percent rate decrease that became effective in the beginning of this year. The Fund's rate decrease reflects projected cost savings from legislative reforms adopted earlier this year in California.

However, the seven percent cut is less than what many observers have been expecting and significantly lower than a 21 percent reduction asked for by Insurance Commissioner John Garamendi.

Defending the smaller-than-expected rate cut, State Fund President Dianne Oki commented that the Fund has to "prudently balance" the needs of policyholders for immediate rate relief with the insurer's need to further strengthen its cash surplus.

Mr. Contreras said he can see the Fund's financial concerns, but he added, "I think they are being overly cautious."

"Obviously, they are concerned about the surplus, because of the tremendous growth they had over the last few years," he said. "I guess they want to protect their surplus and build it up." But Mr. Contreras also noted that, "we think the recent legislative reforms are going to show a lot more savings going forward, and I think the Fund is being overly cautious."

In addition to the State Fund, a number of other, smaller players in the California workers' comp marketplace have also announced their rate reductions recently. Zenith National Group, for example, had announced a 10 percent average cut for new or renewed policies beginning July 1; and Cypress Insurance Company, part of Berkshire Hathaway Group, said it would lower rates by an average of 11.6 percent. Zurich/Farmers Group also announced a 10 percent average rate cut, while American Insurance Company, part of Allianz/Fireman's Fund Group, is filing a 7.3 percent reduction.

Other announcements include an 8.2 percent cut by Reinsurance Company Of America Inc., member of Reinsurance Company of American Group, and a seven percent drop?both by W.R. Berkley Group's Preferred Employers Insurance Company and Swiss Re Group's Employers Direct Insurance.

Mr. Contreras observed that while these rate cuts represent "a movement in the right direction," California businesses are still struggling with the workers' comp crisis. For example, he pointed out one typical case where a small manufacturing firm saw its premiums soar from $50,000 to $150,000 just over the last three years, and said that a drop of, say, seven percent in premiums isn't going to bring a meaningful relief.

"And who knows how these single-digit reductions get translated into day-to-day competitive rates?we will find out. We still need more competition in this state," Mr. Contreras said.