News Briefs

WIAA SUBMITS COMMENTS ON LATEST GARAMENDI AGENDA PROPOSAL: The Western Insurance Agents Association submitted comments to the California Department of Insurance opposing yet another over-reaching proposed regulation impacting the insurance industry. Michael J. D’Arelli, vice president, Legislative & Regulatory Affairs for WIAA, submitted formal opposition to regulations proposed by the Department that prescribe methods for appointing and terminating insurance agents. Specifically, D’Arelli’s comments addressed Section 2194.43(a) which requires insurers to submit the termination of company appointments in writing if the agent has been terminated for cause and further requires the insurer to submit an explanation of the “for cause” termination. “There is no statutory authority requiring insurers to explain their reasons for termination of an agent. The current process is efficient and offers complete transparency,” said D’Arelli. Currently, insurers are required to sign Form 447-54T if the insurer believes the agent may have violated the Insurance Code. It does not require information pertaining to “at fault” terminations. D’Arelli continued, “With regard to Proposed Regulation 2194.43(a), there is no discussion or explanation concerning the authority of the Commissioner to require notification of “for cause” terminations. Proposed Regulation 2194.43(a) does not clarify existing law, but creates a new act and obligation on insurers (notification and explanation of for cause termination) which is not consistent with the Code. Lack of consistency and necessity also are reasons for rejection of the Regulations under Section 11349(a)(d) of the California Government Code.”

COMMISSIONER ANNOUNCES -26.78 PERCENT RATE DECREASE IN WORKERS’ COMP: California Insurance Commissioner John Garamendi announced that workers’ compensation insurers in the state filed rate reductions averaging -14.6 percent for policies incepting on or after July 1, 2005 bringing the cumulative rate reduction to -26.78 percent since reforms were enacted. The decreases indicate that employers should see lower workers’ comp premium bills as workers’ comp claims costs continue to plummet. However, the industry’s premium reductions still lag far behind the cumulative pure premium rate decreases (claims costs) recommended by the Commissioner since the reforms went into effect in 2003 and 2004. Since then he has recommended reductions of -36.5 percent in the pure premium rate, while the industry has made reductions of just -26.78 percent during that same period. AB 227, SB 228 and SB 899 were significant pieces of legislation modeled on the Commissioner’s Roadmap to Reform, which helped cut at least $5 billion annually from the workers’ comp system. They went into effect in 2003 and 2004, reversing the upward trajectory of workers’ comp costs that were strangling businesses across the state. As insurers have implemented the reforms, their loss ratios-the amount they pay for claims compared to premium-has dropped from 87 percent in 2002 to just 41 percent in 2005-an unprecedented reduction in the cost of claims. The intent of the reforms was to release employers from the burden of these costs, said the Commissioner, and insurers must lift that burden. In addition to the Commissioner’s -36.5 percent cumulative pure premium rate reduction, the Workers’ Compensation Insurance Rating Bureau has recommended a further -5.2 percent pure premium rate reduction to take effect on Jan. 1, 2006. The Commissioner will hold a hearing to determine whether to adopt the recommendation on Sept. 16, 2005. The Department has completed analysis of the premium reductions filed by the top 25 workers’ comp insurers to determine how much of the pure premium rate reduction was actually passed through to employers and whether loss cost modifiers were changed to hold back savings. Through the use of loss cost modifiers and rating plans, insurers’ rates vary from the pure premium rate (only claims costs).

FLEX RATING MODERNIZATION BILL SIGNED INTO LAW IN ALASKA: The Property Casualty Insurers Association of American praised Gov. Frank Murkowski for signing into law legislation which will modernize and improve Alaska’s system for establishing rates for homeowners, auto and commercial insurance. Kenton Brine, PCI’s Northwestern Regional Manager, said the new law will help consumers by creating a more competitive environment that could bring more insurance carriers-and a wider range of insurance products and services-to Alaska. The new law, HB 216, will establish a 10 percent band, allowing insurers to charge rates within that range without obtaining approval first from the Dept. of Insurance. Changes greater than 10 percent will still require the department’s prior approval before implementation. “Before this law, Alaska’s regulatory system discouraged insurers from providing innovative products and rate changes because such changes could face lengthy review processes. Some insurance companies viewed that ‘prior approval’ rating system as an additional hurdle in an already-challenging market,” Brine said. Brine noted that under HB 216, Alaska’s Insurance Department can still review rate increases or decreases outside the 10 percent band. “But ultimately, we believe what serves consumers best is increased competition among insurers,” Brine said. “Flex rating has improved the insurance marketplace in several states where it has been enacted in the last five years by encouraging carriers to compete, attracting more insurers to those states and encouraging companies already writing to offer new products at competitive rates to the state’s insurance consumers. The same could hold true for Alaska.”

IIABO TO HOLD 77TH ANNUAL CONVENTION AUG. 28-30: The Independent Insurance Agents and Brokers of Oregon have announced the highlights of their upcoming annual convention, “United We Stand.” The event will be held at the Tigard Embassy Suites Aug. 28 to Aug. 30. Featured speakers will include Joel Ario, Oregon Insurance Division and Tom Grau, National President IIABA. Along with continuing education, golf at beautiful Pumpkin Ridge and a tour of Washington County wineries, the IIABO will be hosting a silent auction to benefit the Christie School. The Christie School provides an array of comprehensive mental health services to children and families. Independent Agents stand united in their desire to help the less fortunate. The final night annual banquet will feature entertainment by Russ Peak, a nationally renowned illusionist and “mind reader.” The IIABO has seen a record number of exhibitors and sponsors supporting the convention according to Executive Director Jim Perucca. “The number of exhibitors is up almost 300 percent from last year’s convention,” he said. Members of other associations that support the independent agency distribution will receive a 10 percent discount on registration fees. For more information on the convention, including various “one day” options, visit their Web site, www.iiabo.org.
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Topics California Carriers Agencies Legislation Workers' Compensation Alaska