California workers' compensation insurers are passing to businesses on average only about two-thirds of the savings in claim costs resulting from reforms put in place two years ago, Insurance Commissioner John Garamendi said Monday.


An analysis completed by the Department of Insurance shows the state's 25 largest workers' compensation insurers filed rate reductions averaging 14.6 percent for policies starting on or after July 1, bringing the cumulative rate reduction since July 2003 to 26.8 percent.


Garamendi contends the cost savings actually warrant a cumulative 36.5 percent reduction in the pure premium rate, which reflects the actual cost of insurance without considering profit margins, taxes and other expenses.


"The result of reforms has been a plunge in the cost of worker's comp claims," said Garamendi, during a conference call. "Has that savings been passed on to employers? The answer is not really. Employers have received some much needed relief, but it hasn't come fast enough, and it doesn't reflect the tremendous savings to insurers from the reforms."


In addition to the commissioner's recommendations, the Workers' Compensation Insurance Rating Bureau has recommended a further 5.2 percent pure premium rate reduction to take effect on Jan. 1. The commissioner will hold a Sept. 16 hearing to determine whether to adopt the recommendation.


Sara Lee, spokeswoman for the California Chamber of Commerce, said that regardless of the pace of rate reductions, the cumulative effect of the reforms has been to improve California's reputation as a place to do business.


"The worker's comp crisis was a huge barrier to creating jobs and keeping companies in the state," Lee said. "We're not hearing about companies leaving the state for Nevada and Arizona as much as we were a few years ago."


Garamendi also said that more insurers are getting back into the California workers' comp market, and premiums have become more competitive, particularly for large employers. But small businesses continue to have to rely on the State Compensation Insurance Fund, which has reduced rates by a cumulative 26.2 percent and is still the largest insurer in the marketplace.


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