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CALIFORNIA WORKERS’ COMP INSURERS SUFFER RECORD LOSSES
FOR 7TH CONSECUTIVE YEAR
Skyrocketing Costs Keep Market Unstable and Unprofitable: Employers Won’t
See Major Savings Without a System Overhaul, says AIA. SACRAMENTO, CA,
Jan. 21, 2004 – Insurers selling workers’ compensation coverage
in California suffered their seventh straight year of losses, according
to new profitability data from the National Association of Insurance Commissioners
(NAIC), the American Insurance Association (AIA) reported today. “The
numbers are in and they show more red ink and financial instability for
California’s worker’s compensation market,” said Mark Sektnan,
assistant vice president, AIA Western Region. “The NAIC’s latest
profitability report reveals continued and increased losses for insurers
selling workers’ comp in California. These numbers tell the simple
truth. The longer the state delays in arresting the system’s runaway
costs, the longer the state’s economy will suffer under the burden.”
“NAIC’s report exposes the misinformation being spread about
the health of California’s workers’ compensation market. This
data disproves claims that California’s market is profitable and
healthy,” said Sektnan. “Bogus rhetoric about profiteering is
a tired ploy that attorneys have used in the past to sidetrack efforts
to really reduce litigation and frictional costs in the system. The bottom
line is that, until the state implements significant reforms, California’s
economy will continue to struggle. Self-insured and insured employers
will not see relief from high costs until we bring equity to the permanent
partial disability rating system, end over-utilization of medical services
and overhaul a dispute resolution system that encourages litigation.”
The NAIC collects data from carriers and issues an annual report on the
profitability of all lines of insurance coverage sold in each of the 50
states. This profitability report compares how much insurance companies
paid out in claims costs and expenses with how much they earned in premium,
plus investment income.
“California workers’ compensation insurers are not only taking
in less money than they spend on claims costs and expenses, their losses
and expenses as a percent of premium are growing,” Sektnan noted.
“In 2001, insurers incurred 15.8 percent more in claim losses and
expenses than they earned in premium and investment income on insurance
transactions. NAIC’s new data show that the cost drivers in this
system are continuing to spiral upward at an alarming rate. In 2002, claim
losses and expenses exceeded earned premium and investment income by 17.1
percent. This means that insurers are paying out $1.17 for every dollar
they earn in premiums and investment income.” “Other states
are not plagued by the same problems as California,” stated Sektnan.
“Workers’ compensation carriers nationally averaged a 6.3 percent
operating profit from 1993 through 2002. However, California carriers
experienced an average 5.7 percent operating loss during the same time
period. Runaway costs are inflicting serious damage on the system and
this expensive trend will not change until comprehensive reform is enacted
to produce a major overhaul of California’s workers’ compensation
system.” www.aiadc.org.
last updated:
January 26, 2004
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Diversified Risk Insurance Brokers
phone: 510/547-3203 fax: 510/547-5648
5900 Christie Ave
License # 0529776
Emeryville, California 94608
copyright © 2001
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