By: The Workers’ Comp Executive is the journal of record for the workers’ comp community
State Fund Takes Major Rate Increase – Some employer up to 17.5%
The State Compensation Insurance Fund is boosting its workers’ comp rates effective April 1st and it says insured employers will be paying based upon the overall average some 9% more under the modifications. Some employers however will be hit harder than others as State Fund is boosting tier a and B by 5%, dropping the 6% group discounts and increasing territorial surcharges in southern California 6.5% for Los Angeles and 4.8 for the rest of the area.
That means that effectively, a tier A or B account which is currently in a group and located in Los Angeles could see an increase of 17.5% [6% for the group, 6.5% LA territory, and 5% for the tier]. Accounts in Los Angeles not in a group will see increases of 11.5%.
State Fund, California’s market of last resort, is also increasing its requirements for schedule credits and debits to $25,000 and increasing minimum premiums by 25%.
Reaction from brokers is swift and sure.
“It’s the worst company partnership I’ve ever experienced,” said a southern California broker who has been in business more than 25 years. The broker, who asked not to be named because he fears retribution, continued, “the pre-quote system in inaccurate and inconsistent wit the final quote. So the broker has no choice but to submit for a real quote – otherwise the pre-quote is pie in the sky.” He says this forces brokers to have a lower hit ratio, which is a metric in their commission system. So in order to do a good job for the client and State Fund “they force us into a lower hit ratio and because of their stupid metrics to take lower commissions. Who ever heard of a market of last resort using hit ratios as a metric for broker performance?”
A Northern California broker explains, “we have [no choice but] to get the market blocked because of SCIF’s unpredictability in pricing.”
Colin Baird a broker at Sullivan Curtis Monroe in Southern California adds that “If SCIF were driving operating efficiency they wouldn’t need this kind an increase and it wouldn’t still lead to a planned underwriting loss.” He asks rhetorically “Is State Fund providing any one of its customers – brokers, injured workers, employers or employees the ‘Excellent Service’ they say they do?”
“The incredible arrogance with which they treat brokers and their staffs is not winning them any friends,” Baird says”
State Fund announced it will not release quotes for April and May new and renewal business until the review period ends- which will be around March 1st. Filings in California are deemed approved unless the Department challenges them, which it has 30 days to do, something we haven’t seen in workers comp recently. In the past State Fund has issued provisional quotes pending expected approval of the filing.
“But not this year,” says Compline’s Dale Debber who is also publisher of Workers’ Comp Executive. “What they’re doing is in keeping with its new hassle the broker as much as possible operating imperative.”
The new rates and formulas have already been added to Compline’s comparative rater so Compline members are able to get indications for their April and May new and renewal business – and can even see the range of possible schedule rating effective right now. “So our guys will have the competitive advantage of knowing where they are in their deals,” Debber says.
Some brokers think its funny, but State Fund expects to see increases in premium levels and says it still expects to take an underwriting loss on the business. The quasi-governmental carrier is budgeting for an underwriting loss of 11.7% after the new rates and formulas take effect.
“Most of us would move every single client out of State Fund if we could,” says another broker. “With the rate increase it will be easier.”
The filing gives State Fund the leeway to apply credits or debits of up to 40% either way under its schedule-rating plan. The schedule-rating threshold will also increase from $10,000 in base premium to $25,000 under the filed plan.
