Why SCIF grew

Risk & Insurance, June, 2005 by Steve Somsen

Dear Editor:

Regarding Peter Rousmaniere's article "An Analysis of Arrogance," (Risk and Insurance[R] April 2005, page 28), I agree with Rousmaniere's opinion that SCIF failed to raise rates, and that their trusteeship was lacking when their management permitted SCIF to become economically unstable.

However, the root cause of SCIF's sudden growth had little to do with their pricing, marketing, or any monopoly. It had everything to do with the number of California workers' comp insurers that went bankrupt or left the state during that period due to the legislature's profligate increases in workers' comp benefits and its employer-hostile legislation.

I recall presenting evidence to the then chairman of a senate committee in 1997 regarding the net effect of the legislature's prior actions which was causing 30 percent annual increases in my school district's workers' comp loss costs. I was essentially told, "So what?"

SCIF is needed because there must be an insurer of last resort. That is exactly how SCIF obtained their enormous market share, because the commercial insurance industry had left California. And who could blame them? In that regard, SCIF has served California well. Having said that about SCIF, I confess, I've administered self-insured WC programs for over 20 years and never placed business with SCIF.

STEVE SOMSEN

Risk Manager

Sacramento, Calif.