2012 was a year of extraordinary change – for State Fund, for California’s workers’ comp market, and for each industry participant. We saw the passing of the most significant reform package in almost a decade, the improved coordination among state agencies and industry participants to help fight fraud and the underground economy, and the enactment of tougher regulations to protect California’s workers. We also began to see some optimistic signs of economic recovery, such as slight job growth, stabilizing house prices, and improved consumer confidence.
For State Fund in particular, we began to realize the vision of a more efficient and stable State Fund laid out several years ago. I’d like to take this opportunity to reflect on the work our employees have undertaken to put State Fund on a sustainable path to become a competitive, agile company that provides fair prices and excellent service.
- Efficiency: In 2011, State Fund embarked down a transformative path that would help it become the efficient and fair-priced leader in California. Our multi-year plan to redesign our operations, improve efficiency and reduce costs for employers involved difficult elements, such as reducing our staff size, closing some office locations, and reducing other assets that no longer met market demands or supported an efficient State Fund. In 2012, we began to realize the financial benefits of those difficult decisions and were able to declare a policyholder dividend twice the size of our previous year’s dividend, State Fund exists to make sure that employers don’t pay too much for their workers’ comp coverage. State Fund’s actions to reduce expenses is expected to yield $300 million dollars in annual savings and will help State Fund maintain fair pricing and bring value to a larger swath of the available market. In short, it will help us fulfill our mission.
- Dividend: In October, State Fund announced a $100 million dividend to qualifying policyholders for the 2012 policy year. This represents approximately 10 percent of 2012 estimated annual premium and is a direct result of State Fund’s operating efficiencies, solid investment returns, and disciplined underwriting. Our commitment to becoming more efficient has been paying off for policyholders, helping to provide some relief in a struggling economy and positioning State Fund as the strong, stable, and fairly priced workers’ comp provider for California’s businesses.
- Fair Pricing: This year, State Fund made two very significant rate announcements. First was in June, when we announced that we would be moving to a tiered-rating system. The revised rate structure will allow State Fund to improve pricing accuracy for each risk, which will result in rates that more fairly reflect the risk characteristics and experience of each policyholder. Our tiered pricing will be implemented in 2013 and will benefit many California employers through lower premiums. Second was in October, when State Fund announced a 7 percent rate reduction, effective March 1, 2013. The rate reduction reflects State Fund’s commitment to both the substance of reform delivered by SB 863 and to maintaining fair prices for California’s businesses. Together, these actions will help State Fund remain the strong, stable, fair-priced leader.
State Fund has taken great strides this year to get our financial house in order, which positions us to focus on our operations going forward. These have not been easy decisions to make or implement, but they were necessary and they are already creating value for our policyholders.
These accomplishments belong to State Fund’s 4,600 employees. Without their dedication to conquering tall challenges, State Fund would not be able to realize its mission of being the strong, stable and fair-priced leader for all of California’s businesses.
We’ll keep you apprised of our ongoing progress in these areas throughout 2013. In the meantime, tell us what you think were the most significant changes in 2012 – for State Fund, the industry and the state.
