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May 28, 2004

CONTACT: Doug Heller - 310-392-0522 x309

Worker's Comp Advisory Rate Won't Relieve Businesses: Too Small and Unenforceable

Schwarzenegger's "Reforms" Block Garamendi From Requiring Even Modest Cut in Premium
Santa Monica, CA --The 20.9% drop in Commissioner Garamendi's workers' compensation pure premium rate will not translate into sufficient savings for businesses, the non-profit Foundation for Taxpayer and Consumer Rights (FTCR) said today. Because Governor Schwarzenegger refused to agree to any form of insurance rate regulation in his workers' compensation overhaul earlier this year, California regulators cannot require insurance companies to abide by the advisory cut made public today.

"Because Governor Schwarzenegger refused allow for any regulation of insurance company premiums, his promise of relief rings hollow and California businesses will continue to suffer under outrageous insurance rates," said FTCR's Executive Director Douglas Heller. "The question is whether or not Schwarzenegger will be held accountable for failing to provide real reform."

While insurance companies are not expected to follow Garamendi's advisory cut (It is only a recommendation and, for example, Zenith Insurance said recently that it would only lower rates by 10%), even the 20.9% would not give California businesses enough savings after years of multi-digit rate hikes. For example, a business that paid $50,000 for workers' comp insurance in 2001 and faced a 50% increase in each year since (2002, 2003 and 2004), would end up paying more than $130,000 even with the full 20.9% rate cut.

"After such outrageous hikes in recent years, a 20.9% rate cut will provide about as much satisfaction as if today's gasoline prices were to drop by a nickel," said Heller.

Consumer advocates note that Governor Schwarzenegger accepted more than $550,000 from workers' compensation insurers since being elected last October, including $100,000 while he was negotiating the new law. The group repeated its demand that Schwarzenegger return the workers' comp money, based on the Governor's statements that he would not accept insurance company money.

"The insurance industry's $550,000 in donations to Schwarzenegger is a much more important number than the unenforceable twenty percent advisory rate cut. Because the governor refuses to regulate his insurance company contributors, California businesses will continue to be saddled with unnecessarily high insurance rates," said Heller.

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