Calif. Commish Seeks WC Rate Cut

California Insurance Commissioner John Garamendi, whose recommendations have been largely ignored by insurers, has called for a fourth consecutive decrease in workers' compensation premium rates–this time by 15.3 percent.

Mr. Garamendi's call for a reduction is only advisory, and he has expressed concern over what he sees as insurers taking advantage of the savings brought by reforms rather than passing them on to their customers.

In making his most recent announcement, he noted that his prior reductions totaled 36.5 percent, while insurers had only cut rates on average by 26.7 percent since reforms were enacted in California in 2003.

"This does not compute," he 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."

Mr. Garamendi's criticism of insurers has drawn fire from the industry, even prior to the latest announcement. Sam Sorich, president of the Association of California Insurance Companies, said such claims paint an unfair portrait of the workers' comp market, adding that it provides only "a snapshot in time," and often doesn't take into account recent rate changes.

Additionally, many insurers–including the state insurer of last resort, which controls roughly half of the workers' comp market in California–have used the savings to build reserves.

Overall, however, the reforms enacted in California have helped, Mr. Garamendi said, by stopping what he called an "up-escalator" of rising workers' comp costs that were slowing the state's economy.

"The turnaround provided by this legislation is significant and great news for our state's economic health," he said. "Insurers should recognize that the additional savings now available could be the fuel that injects even more life into our recovering economy."

However, the commissioner also noted that, as the reforms made by the most recent legislation, SB 899, take full effect, the pace of decreasing rates could slow somewhat.

"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."

John Garamendi

California Insurance Commissioner