|
The following
is a response from the Association of
California Insurance Companies in regards to
Commissioner John Garamendi's recommended
decrease in workers' comp rates.
Although not
fully implemented, reforms enacted over the
past two years to overhaul California's
workers' compensation system are posting
positive results for California's business
community.
Rates are
steadily dropping and insurers are returning
to the California marketplace - both positive
developments for a system that was described
as badly broken just 24 months ago.
We currently
are in a transition period. Prior to the
reforms, the combined average loss ratio
(claims and administrative costs) hit a peak
in 1999 of 184 percent. That means that for
every premium dollar received during that year
by insurers, they paid out $1.84.
The pendulum
now is swinging the other way with substantial
changes in the loss ratios, according to
figures just released by the Workers'
Compensation Insurance Rating Bureau.
Ultimately, the reforms - as they are fully
implemented over time - will continue to
stabilize the system and restore balance.
Meanwhile,
rates continue to drop. The Rating Bureau is
recommending yet another 5.2 percent reduction
on Jan. 1, 2006. Continuing the downward trend
in rates, this comes on the heels of double
digit decreases recommended by the
commissioner and Rating Bureau earlier this
year.
Another
strong indicator of the post-reform changes is
the relationship between workers' compensation
premiums and payroll. In the last half of
2003, employers were paying a high of $6.36
per $100 of payroll. From January through
March of this year, the rate was $5.21 per
$100 of payroll - a substantial decrease.
It is
important to keep in mind that regulations
implementing key elements of the reforms are
still being finalized for medical provider
networks, utilization reviews and the
disability rating schedule.
At the same
time, it is uncertain how the reform
provisions will be interpreted and implemented
by workers' compensation judges. Pending
litigation challenging key segments of the
reforms is also casting doubt over the
eventual outcome of the reforms.
But despite
these uncertainties, the reforms are
progressing and results for California
businesses are expected to improve with time
as the final pieces of the reforms are
implemented.
(Article
taken from August 2005 Insurance Journal)
|
