California’s Workers’ Compensation-Completing the Reform DWC 13th Annual Educational Conference: L.A. March 1 & 2, Oakland March 6 & 7,

2006

Aggregate Rate Change Data for the CA Workers’ Compensation Industry

(Cumulative Post Reform Rate Changes as of 1/1/06)

• CDI Commissioner Approved cumulative Pure Premium Rate Reductions -46.24%

• State Compensation Insurance Fund cumulative Filed Rate Reductions -38.03%

• CA Workers’ Comp. Industry cumulative Filed Rate Reductions -37.70%

• CA Workers’ Comp. Industry Actual Net Rate Reductions reported by WCIRB as of 9/30/05 -31.57%

Filed Rate Changes for Top 10 Groups for 1/1/06 Renewals (Cumulative Post Reform Rate Filings as of 1/1/06)

COMPANY/GROUP MARKET SHARE CUMULATIVE RATE CHANGE

• State Fund 51% -38.03%• AIG Group 6.8% -32.83%• Farmers/Zurich 5% -43.51%• Zenith 4.6% -32.32%• St.Paul/Travelers 3.7% -41.08%• Everest National 3% -36.36%• Grt.Am/Republic 2.1% -50.14%• Virginia Surety 2% -29.80%• Liberty Mutual 1.9% -43.17%• Clarendon 1.8% -36.46%

Newly Authorized Workers’ Compensation Insurers since AB 227, SB 228, SB 899

Determined by initial Rate Filing or Certificate of Authority Applications, as of 2/27/06)

COMPANY / GROUP NAME DATE OF ADMISSION

• 1. Norguard Group 2/2/04• 2. Employers Reinsurance Corp. 7/28/04• 3. National Liability & Fire Insurance Co 9/24/04• 4. Compwest Insurance Company 10/4/04• 5. Farmers Reinsurance Company 11/16/04• 6. California Insurance Company 12/23/04• 7. Berkley Regional Insurance Company 1/13/05• 8. TNUS Insurance Company 1/14/05• 9. Partner Reinsurance Company 2/15/05• 10. SUA Insurance Company 5/9/05• 11. Western United Insurance Company 7/29/05• 12. Insurance Corporation of Hannover 8/30/05• 13. Midwest Employers Casualty Company 12/30/05• 14. Endurance Reinsurance Corp. of America 1/6/06• 15. Great Divide Insurance Company 2/16/06

Pending Applications for New Workers’ Compensation Insurers since passage of AB 227, SB 228, SB 899

Determined by initial Rate Filing or Certificate of Authority Applications, as of 2/27/06)

COMPANY NAME DATE OF APPLICATION

• 1. Cornerstone Compensation Insurance Company 3/2/05

• 2. Advantage Workers’ Compensation Insurance Company 3/9/05

• 3. Lincoln General Insurance Company 6/13/05

• 4. Financial Pacific Insurance Company 10/20/05

• 5. Nova Casualty Company 2/24/06

• 6. Memic Indemnity Company 2/27/06

Average Rate Per $100 of Payroll

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

1993 1995 1997 1999 2001 Jul-02

Jul-03

Jul-04

Jul-05

Source: WCIRB & CDI Filings California Dept. of InsuranceAs of 1/1/06

California Workers’ Comp. Direct Written Premium

0

5

10

15

20

25

1989 1991 1993 1995 1997 1999 2001 2003 20059

mo's

Direct Written Premium(in billions)

Net of Deductible

Calendar Year California Dept of InsuranceAs of 9/30/05

Source: WCIRB

0

2

4

6

8

10

12

14

1989 1991 1993 1995 1997 1999 2001 2003

Estimated UltimateLosses (in billions)

California Workers’ Comp. Estimated Ultimate Losses

Accident Year California Dept. of InsuranceAs of 12/31/03

Source: NAIC

California Workers’ Compensation Loss Ratios

0

20

40

60

80

100

120

140

160

1989

1991

1993

1995

1997

1999

2001

2003

Accident Year Loss Ratio

California Dept. of InsuranceAs of 9/30/05Source: WCIRB

California Workers’ Comp. Average Loss Severity

$0$5,000

$10,000$15,000$20,000$25,000

$30,000$35,000$40,000$45,000$50,000

1989 1991 1993 1995 1997 1999 2001 2003

Avg. loss severity

Estimated Ultimate Loss Per Claim Includes impact of AB 227, SB 228, SB 899.

Source: WCIRB California Dept. of Insurance

California Workers’ Compensation Claim Frequency

-0.25

-0.2

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

1991

-199

2

1992

-199

3

1993

-199

4

1994

-199

5

1995

-199

6

1996

-199

7

1997

-199

8

1998

-199

9

1999

-200

0

2000

-200

1

2001

-200

2

2002

-200

3

2003

-200

4

2004

-200

5

California Dept. of InsuranceSource: WCIRB

California Seasonally Adjusted Civilian Employment

020000004000000

60000008000000

100000001200000014000000

160000001800000020000000

1990

1992

1994

1996

1998

2000

2002

2004

Civilian Employment

Source: Employment Development Dept. California Department of InsuranceAs Of 1/24/06

California Workers’ Compensation Accident Year Combined Ratio under

Open-Rating 1995-2004

0%

20%

40%60%

80%100%

120%140%

160%180%

200%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

ExpensesLAELosses

Source: WCIRB California Department of InsuranceAs of 12/31/03

Comparison Shop on the internet

• Comparison Shop on the internet– www.insurance.ca.gov - Click on “Consumers”, “Compare

Premiums”, “Information on the CA workers compensation rate comparison”, & click on the range of class codes that contains your governing class code. For example if your class code is 8810, click on codes 8001-9000, then click on the blue “Class Code Search” link. In the search PDF field, type in 8810 and click on the “search” button. Once the search is complete, click on the “Hide” button to enlarge the rate pages. Click on the Back button and go back to the Cal WC Rate Comparison main page, and click on “Check your insurance company’s profile” link to obtain the phone number of the company. Ask the company for a quote, or for an authorized broker that may provide a quote. If the quote is too high, select another company from the list. Check company licenses and broker licenses. Check financial stability ratings.

– Many companies have their own websites and can provide on-line quotes.