Things remain interesting in California.
Shortly after the legislature passed Gov. Arnold Schwarzenegger's sweeping reforms, Insurance Commissioner John Garamendi, announced that his office had calculated that those reforms, when combined with other, more minor reforms passed into law at the tail end of 2003, would translate to a reduction in total premiums statewide of nearly 21%. Well, here we are three months later. Insurers have filed their new rates, and the California Commissioner is not happy.
Correct that - he's happy with the two national carriers, Liberty Mutual and Republic Indemnity, which filed for reductions of 17.54% and 20.48%, respectively. Of course, those two giants only write a shade more than 4% of the state's premiums.
The overall reductions filed by all companies writing in the state, however, are only 10.38%, or half of what Garamendi wanted. Moreover, the behemoth State Compensation Insurance Fund (SCIF), which currently writes more than 53% of all premium, filed for only a 9.7% reduction in rates. (A separate issue, the ice we can't see under the water, is the very real concern for the solvency of the SCIF. The Department of Insurance will release a much-anticipated report on SCIF reserve adequacy in August, 2004. We should learn a lot from that report.)
With premiums in the state having soared to well over $20 billion, the Governor wanted to cut California's rates in half over time. That would nearly approach where rates were five years ago, before everything blew up. Unfortunately, what we see to this point won't even get him 20% of the way there.
No matter how the politicians in Sacramento spin it, employers in California continue to face business-breaking costs in workers' compensation.