GARAMENDI ON WORKERS' COMP SAVINGS

 April 26,2005: A growing gap between plummeting costs in the workers' compensation system and a slow downward trend in insurance premiums charged to California businesses is drawing the ire of Insurance Commissioner Garamendi. "Clearly costs are on a down escalator," Garamendi said. "Given the precipitous drop in the cost of claims, we should be on an elevator falling rapidly."

 The Workers' Compensation Insurance Rating Bureau, an insurance industry- funded actuarial group, has recommended a 10.4 percent decrease in the advisory pure premium rate set by the insurance commissioner. Critics say rates should be falling much faster.

 Garamendi cited recent figures showing that costs have dropped to the point that 45 percent of premiums collected by insurers are being paid out as claims. That figure does not include all costs. Garamendi made his comments following a hearing in San Francisco to take testimony on upcoming changes to workers' compensation advisory rates.

 Nicole Mahrt, a spokeswoman for the American Insurance Association, said once all costs are calculated, 72 percent of premiums are taken up by expenses. The remaining 28 percent have provided a boom period to insurers estimated at $6 billion.

 Critics say insurers are pocketing savings rather than lowering insurance bills for California businesses. The industry is currently fighting against a renewed effort by California Democrats to impose rate controls in order to force premiums down.

 "The market will take care of it," Mahrt said. "Companies that don't pass along savings will not be able to compete in the marketplace." Insurers point to a series of positive trends that point toward falling rates. Competition is returning to the market for the first time this decade as companies post their first profits since a rate war in the late 1990s.

 Bud Weisbart, owner of A&R Tarpaulins in Fontana, said his workers' compensation rates fell by approximately 20 percent this year. "There's finally some competition out there," Weisbart said. "We received bids from four companies."

 However, despite the falling rate, Weisbart said he's more concerned about how the system works for business and employees alike. "If injured workers are getting treated the way they should be treated, and if companies are getting treated fairly, then costs will be what they should be," he said.

 Although the advisory rate has fallen in recent years, insurers are not bound to follow the rate, which is considered an industry benchmark. In late 2003, Garamendi signed a 14.9 percent reduction on the basis of legislation signed by Gov. Gray Davis shortly before he was recalled.