Workers' compensation insurers step back into market.

WHEN L.A. businesses go to purchase insurance, they invariably want to know how much workers' compensation will cost--and even more pressing in recent years--where they can get it.

After skyrocketing costs and large industry losses drove many insurers out of the workers' comp market, several rounds of reform have brought most insurers with offices in Los Angeles back into the market.

That's good news for business owners, who are again able to purchase workers' comp as an add-on to their "business owner's package," known in the industry as simply a BOP policy.

Rather than purchasing separate property and liability coverage, many small businesses traditionally opt to buy them together to get a better deal. When their BOP insurers stopped offering workers' comp, business owners had to go elsewhere.

For years, the state-run State Compensation Insurance Fund of California and Zenith National Insurance Corp. in Woodland Hills were the only carriers in the state that were writing workers' compensation policies.

Even then, the price was steep. At their worst, workers' comp premiums soared 30 percent to 60 percent in 2003, resulting in average premiums more than doubling over the previous four years.

Now, some of the players are back in, and the rates have been falling since early 2004. In May, California Insurance Commissioner John Garamendi called for an 18 percent cut in workers' compensation rates. Some balked, but one carrier, Hartford Financial Services Group Inc., announced that it would drop its workers' compensation rates an average of 18 percent for policies written after July 1, 2005. Hartford claims that rates have fallen 32 percent since January 2004.

"California is always a hotbed for competition because it is such a large market, and in workers' compensation, we're really seeing what people were predicting, which is, if you open it up and create and environment of competition, more companies will come in and rates will fall," said Eric Trott, a spokesman for Safeco Insurance Cos., based in Seattle.

Last year, Safeco became one of the first insurers to begin offering workers' comp as an add-on to BOP packages for small and medium-sized businesses, which make up a large part of the market in Los Angeles County.

These policies provide reimbursement for up to a year of lost revenue resulting from an insured property loss when a company suffers disaster-related damage. But they do not include professional liability insurance, which protects a company from losses or expenses resulting from negligence or errors.

In the past several months, other carriers have joined the pack, including Liberty Mutual Insurance Co. and Hartford, which has been particularly aggressive in writing workers' compensation.

Other big competitors in Los Angeles' BOP market include Farmers Insurance Group, St. Paul Travelers and Zurich North America.

Insurers acknowledge that it wasn't until after the state Legislature passed reform measures in 2003 and 2004 that carriers began putting their toes back in the workers' compensation water. The reforms helped limit chiropractic and physical therapy visits, and cut back on the practice of injured workers shopping around for doctors to get the highest disability payments.

Reform Results

Workers' comp premium rates per $100 of payroll in California.

1/02-6/02    $4.28
7/02-12/02   $4.82
1/03-6/03    $5.62
7/03-12/03   $6.36
1/04-6/04    $5.87
7/04-12/04   $5.56
1/05-3/05    $5.21

Source: 2005 Workers' Compensation Insurance
Rating Bureau of California

Note: Table made from bar graph.