Bollier’s Journey to Lilliput
By Robert Warne - June 20, 2002One thing that parties on all sides of California’s workers’ compensation market can agree on is that the playing field has been leveled. Within the last couple of years California State Compensation Insurance Fund has found itself in a class of its own in the state’s hardened market.
With a charge to be always available and fairly competitive, there is no one to challenge the Fund as it has rapidly become the only available workers’ compensation carrier.
Now that it is the largest writer of workers’ compensation insurance in the nation, according to A.M. Best, the Fund has become an easy target.
Like Gulliver’s journey to Lilliput in Jonathan Swift’s classic tale, the Fund has been tied down from all sides. The government and private corporations, like the Lilliputians who measured no more than six inches with their cords have tied the Fund to the ground.
And those that are trying to tie the Fund down have a completely different perspective of its role than those running the Fund.
Kenneth C. Bollier, President of SCIF stated in a letter to policyholder June 7 that, “Unfortunately, there is a mindset in the workers' compensation insurance industry that State Fund should charge higher prices to bail out those insurers who under-priced their products and to facilitate a higher profit margin for the others. This mindset is apparently shared by the California Department of Insurance.”
The way Standard & Poor’s (S&P) analysts tell the story is that the Fund aggressively competed for business on price, and “has been swift to lap up the business other insurers could not stomach.”
The analysts also think that the Fund has misinterpreted its original mandate and through competitiveness lost sight of its objective.
Bollier disagrees and said in his letter, “its role as an always-available market and a fairly competitive carrier. Our underwriting standards were maintained; brokers and agents were given expanded access and price increases were taken gradually to lessen the impact on California employers.”
Thomas Calderon, Assembly Insurance Committee chairman hasn’t minced any words regarding the Fund. According to the Los Angeles Times he called the Fund irresponsible and accused it of aggressive marketing.
He said that an insurance company can’t sustain the level of growth the Fund has and still have enough reserves to cover losses.
“The only way you can do that is to be smarter than any other private insurer in the country, to have better loss control and to have the highest rates,” Calderon told the Times. And “They do not have any of these elements.”
Private insurers are nervous that if the Fund goes down, they will be left to pick up the tab.
S&P analysts are also worried that because all of the Fund’s business is written in California it is exposed to a greater concentration of risk.
The analysts prescribe that for the Fund to climb back on more stable ground it will have to limit business and increase rates. They think that other insurers will fill in the vacuum as prices are increased.
Tied up in chords in the public square, the Fund is going to have to make a move. Gulliver eventually fled Lilliput after he learned of a plot to accuse him of high treason. From some of the language directed at the Fund, one may think the Fund has been accused of high treason. The only problem though for the Fund is that it can’t flee. So it will have to decide whether it will be able to break the bands with it’s own strength or convince its captors it will do what they want, so they’ll loose it. | 
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