California's insurance commissioner has recommended an 18.4 percent increase in workers' compensation premiums in 2000 after several years of little or no increases.
State Insurance Commissioner Chuck Quackenbush is calling for the large increase because rates have been kept artificially low due to insurance carriers seeking market share, said Tim Taylor, legislative analyst for the commissioner.
"We're trying to ensure that workers' comp carriers do not, over the long term, become insolvent by pricing their products too low in an attempt to gain that market share," he said.
If every insurer follows Quackenbush's recommendation, premiums across the state will increase by about $1 billion next year. Taylor calls that a "substantial" hike for a system that sees an influx of $6 billion a year in workers' comp premiums paid by employers. Any rate adjustments will apply to new and renewal policies with anniversary rating dates on or after Jan. 1, 2000.
Companies have been getting a "better deal than they should have" the past several years, Taylor said. He indicated that businesses have known for some time that a large increase in premiums would happen sooner or later.
Still, California Manufacturers Association President Jack M. Stewart called the recommended increase "bad news" and said it will hurt businesses and the economy.
"Workers' comp costs per employee in California are already the highest in the nation," Stewart said. "This nearly 20-percent hike in insurance costs will simply give out-of-state competitors more of an advantage against California businesses."
Allan Zaremberg, president of the California Chamber of Commerce, cautioned that legislation to enact excessive benefit increases "will be a double hit to employers." There has been legislative debate on whether to increase workers' comp benefits.
"A hug benefit increase, which labor unions and applicant attorneys insist upon, would combine with higher system costs to create a double hit on employers that cannot be absorbed without consequence to employers, workers and the economy," Zaremberg said.