Garamendi, locked in a tight election battle for Lieutenant Governor, approved a 9.5% cut in the state’s official “pure premium” workers’ compensation rates, disregarding the more modest 6.3% rate cut proposed by the Workers’ Compensation Insurance Rating Bureau. Garamendi’ decision came the weekend before the November General Election.

Prediction: Look for your insurer to cut Jan. 1 rates, but not by 9.5%

Since July 2003 Garamendi has recommended rate decrease of 59.4% combined, including this last action. Thru the first six months of 2006, insurers have actually implemented an average premium rate reduction of 42%. When Commissioner Garamendi has stayed close to the WCIRB recommendations, his decisions have been influential and closely followed by many major insurers.

Several times, unfortunately, Garmendi has deviated significantly from the WCIRB proposals, ordering much larger cuts in the pure premium rates than the WCIRB actuaries proposed. When that has occurred, inevitably:

• Most major insurers ignore the Commisioner’s rulings
• Within 6 months, the Commissioner has to adjust the rates back to close to the WCIRB proposals

California insurance companies are not required to adopt the Commissioner’s rate changes, and several insurers had already filed their rates for 2007 before Garamendi’s decision. SUS Insurance Co. followed the WCIRB’s recommendation for a 6.3% reduction in their October filing. Cypress Insurance Co. filed for a 3.8% cut and Siris America Insurance Co. propose no change to its rates last month.

State Fund, Zenith, Zurich, AIG and other major carriers have yet to file.

There is reason for optimism for employers. Insurers are making large profits right now in California workers’ compensation insurance. Through June 30, 2006, the calendar year policy loss ratio industry wide was reported at 44%. This ratio is 12% lower than that for the first six months of 2005, and 10 percentage points below the full calendar year 2005 loss ratio. The calendar year combined ratio for 2005 is reported at 79%- the lowest in many, many years.

If you would like to know the “pure premium rates” approved by Garamendi, just email the request to DonDressler1@hotmail.com

We are available to help you lower your workers’ compensation experience modification, attack problem claims, assist in claims reviews with your insurer, or advise on lowering workers’ compensation costs.