Garamendi Calls For Bigger Insurance Rate Cuts
By Steve Lawrence, Associated Press - November 11, 2005SACRAMENTO (AP) _ Citing a "precipitous drop" in claims costs, Insurance Commissioner John Garamendi accused workers' compensation insurers Thursday of protecting profits instead of passing on savings to California employers.
"They want to hang on to their profits," Garamendi said in a conference call with reporters. "Who doesn't? (But) I don't think there is a business in California that wants them to grow fat at the expense of business."
Garamendi's criticism came as he projected another 15.3 percent drop in the cost of paying claims for job-related injuries.
Altogether, Garamendi has found that the cost of claims has dropped 46.2 percent since mid-2003, when lawmakers began passing a series of measures to reduce skyrocketing insurance bills faced by employers.
Workers' comp insurers have cut their rates only 26.7 percent on average through the middle of this year, even though they are paying out only 38.5 cents to cover claims for every $1 they are taking in in premiums, he said.
"I have been hammering on the insurance industry since this reform effort began to immediately pass through any savings that materialized from the legislation," Garamendi said. "That has not yet been accomplished."
Nicole Mahrt, a spokeswoman for the American Insurance Association, an insurance company group, said Garamendi's figures didn't take into account recent discounts offered by insurers.
"Some companies have taken all of the commissioner's recommendations,'' she said. "Other companies have had to be more conservative and cautious. But overall insurers have taken at least a 30 percent reduction."
She also said that insurers needed to be "always cautious that something will happen politically or as a result of litigation that will upset the reforms. One bad court decision can undo the entire reform effort" and boost costs, she said.
Garamendi said private insurance companies were following the lead of California's biggest worker's comp insurer, the quasi-governmental State Compensation Insurance Fund, in setting rates.
He suggested that Gov. Arnold Schwarzenegger should pressure the fund's board of directors to approve bigger rate cuts, saying that would produce more jobs that Schwarzenegger's upcoming trade mission to China.
"I believe State Fund is financially sound or close to it," Garamendi said. "They don't need to hang on to their (money) as much as they have in the past."
Spokesman Jim Zelinski said the fund has cut rates an average 28.9 percent since the end of 2003.
"We think we have demonstrated that we are passing on savings from the reform legislation to our policy holders and will continue to do that...," he said. "We set rates that we think are fair, are actuarially sound and will ultimately cover the cost of claims."
Garamendi held a telephone news conference to issued his latest pure premium advisory rate, his estimate of the cost of paying benefits and processing claims. The rate doesn't include profits, overhead, taxes, commissions and other costs paid by insurers.
But his estimates, issued twice a year, often serve as benchmarks to determine what employers pay for worker's comp insurance.
His latest projection is designed to help insurers set rates for policies sold or renewed starting Jan. 1. | 
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