The proposed law would require the California Department of Insurance (CDI) to publish on its website various financial information about workers' compensation carriers.
The bill was introduced by Assemblyman Ben Hueso, D-San Diego, who said in Senate testimony Monday that based on a recommendation Rand Corp. made in a 2009 report titled, “California’s Volatile Workers’ Compensation Insurance Market: Problems and Recommendations for Change.”
Rand at that time was responding to a request by the Commission on Health and Safety and Workers’ Compensation (CHSWC) pursuant to legislative request to determine the cause of carrier failures leading up to the meteoric rate increases in the early 2000s.
One recommendation was to post annual and quarterly financial statements on the Insurance Department website so more people can view the reports.
The problem as identified by Hueso and supporters is that carrier information, while publicly available, is not easily accessible or identifiable.
Carriers were against it because the bill is over-broad and discriminates against workers' compensation when the same sort of requirements aren't made on other lines of insurance.
Apparently those objections were quieted when Hueso amended the bill when it came out of the Senate Insurance Committee.
The bill would add section 901 to the Insurance Code, and as amended would read:
The department shall include on its Internet Web site a dedicated Internet Web page that includes workers' compensation data, statistics, and reports covering both insurers and self-insurers, including, but not limited to, claims loss data, expenses, and financial reports. The department shall only use data already collected by both the department and the Department of Industrial Relations. Nothing in this section shall be construed to authorize the release of information protected by other applicable law.
To implement the bill it will cost taxpayers somewhere between $65,000 to $128,000 in one time expenses and ongoing annual expenses of $24,000 to $40,000 - all depending on how the data is obtained and maintained.
That's not a whole lot of money in the grand scheme of things.
But that doesn't make the bill any more appealing.
When we really get down to it, this is much to do about nothing.
Having this financial data published so that it is more easily accessible isn't going to create any better oversight of the insurance industry because, bottom line, the public doesn't care and doesn't know how to read insurance financial statements.
There might be a few brokers and consultants that would benefit from easier access to this information, but there's not guarantee of that, and there's no guarantee that this information is going to create any better oversight or enforcement activity.
In addition, the CDI's job is to review company financials on a regular basis and call into question irregularities of other elements that set off alarms on a carrier's or self insured's health.
CDI had that power in the late 1990s and early 2000s, but that didn't provoke the agency into amelioratory action until it was too late and carrier carnage had been passed off on to policy holders, even while there were calls to action by industry experts as reinsurance treaties were passed up the food chain with ever lower strike points upon which primary carriers relied in underpricing their product.
Financial statements would not provide the insight into such activity, and in fact might even hide such activity because the cash position of carriers would actually look healthier than in practice and anticipated liabilities would be offset by reinsurance assets.
When the primary carriers that bought into this reinsurance scheme (see "Unicover Partners") they didn't think that reinsurers would deny their claims - it was the denial of reinsurance claims and attendant delay inherent in litigation of billions of dollars of liability that put these carriers out of business because cash flow was shut off.
Carrier information would have done nothing to prevent that crisis.
The effort to get SB 36 into law would be better put to use beefing up claims enforcement and oversight via either the Division of Workers' Compensation's Audit Unit or reinstating stronger penalties for private action against recalcitrant claims payers either ignoring their duties or willfully failing to adhere to the law.
We don't need information. We need enforcement action.
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