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Old 29th May 2009, 02:03 PM   #1

Join Date: Apr 2009
Posts: 18
Default California Workers Compensation Rates Out Of Control

I hope you don't own a business in California. Their work comp rates are really going crazy. Here's a recent email I received about the newest development. At least it has some good news in that rates aren't going to go up as much as thought yet.


Not waiting for whatever decision California Insurance Commissioner Steve Poizner issues regarding a mid-year rate increase, several workers' comp carriers have filed new rates. The carriers have crunched their own numbers and they are well below of the 23.7% recommended by the Workers' Compensation Insurance Rating Bureau. This could portend a continuing completive market, a 90s-like coming debacle, or political action.

One thing is certain, the filings are likely to give Poizner cover for cutting significantly the Bureau's recommendation. Last fall he cut 11 points off the Bureau's recommended January increase after discounting its findings on medical inflation, and separating State Fund's results which is responsible for much of the increase in its current recommendation.


Notable among the filings is the 4% increase sought by Zenith Insurance and the 10.3% increase filed by two companies in the Berkshire Hathaway Group.

That Zenith came in so low caught some by surprise in light of its history of disciplined underwriting and its recent poor financial results. Zenith moved this spring to reduce its staff by 6% as its combined ratio climbed to nearly 120% in the first quarter. The rate increase mirror's the filing for a 4% increase that Zenith made last November for its January 1 policies. At the time, CDI had approved a 5% increase in the advisory rate. Zenith's rates were higher than industry average however.

Zenith wrote a little over $325 million in premium last year or 4.26% of the California market, which was down from the $394 million and 4.38% market share in 2007. Zenith's A rating was recently reaffirmed by A.M. Best.

Zenith president Stanley Zax is one who is unusually active in politics and a democrat who thinks Jerry Brown will be the next Governor. This kind of filing could help, Governor Schwarzenegger, to whom has contributed mightily, save his workers' comp reform , and put Poizner in a difficult position regarding an increase. But Poizner is likely to step over this stuff and do what he thinks is right.
Berkshire Hathaway

Filing from Berkshire Hathaway was Oak River Insurance Company and Cypress Insurance Company, which combined had just under 3% of the California market last year. The companies' filing for a 10.3% increase also includes a revision to their pure premium rate modifiers.
Guard Group

And the three companies in the Guard Insurance Group that currently write workers' comp in California filed for increases ranging from 2.2% to 5%. Amguard Insurance Company and Eastguard Insurance Company both filed for a 5% uptick, while Norguard Insurance Company filed the 2.2% increase. Based in Wilkes-Barre, PA, Guard is a wholly owned subsidiary of Israel's Clal Insurance Enterprises Holdings, Ltd.

The Guard companies had a combined California market share of 0.26% last year with only $19.9 million in written premiums -- an increase of $6 million in additional premiums over 2007. The company carries an A- rating by A.M. Best.

Additional filings are expected this month as carriers move to have updated rates in place for their July 1 policies. Carriers have to wait 30 days before implementing new rates and the continuation of the rate hearing is not until June 8, but the waiting period could be waived by the commissioner.

Workers' Comp Executive is constantly updating our sort-able chart of workers' comp rate filings and will be adding the latest rate filings to the bottom of the News Digest every Monday morning.

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