Sacramento, CA - The State Compensation Insurance Fund released its 2016 Annual Report of financial performance for 2016.
State Fund's premium continued to decline in 2016. The decline was attributed to the soft market and increased competition. In response to favorable loss development State Fund lowered its premium rate by 9.5% effective September 1, 2016 and implemented other initiatives throughout 2016 to create product and service values for its customers.
The President's Message pointed out "We welcome a robust market, as employers benefit when insurance companies must compete for their business. 2016 marked another year of healthy competition in the California workers' compensation market. Although State Fund's premiums declined somewhat, we were pleased to introduce a rate filing that included an overall decrease in collectable premium of 9.5 percent as well as an expanded pricing model, which further enhances pricing accuracy and makes our rates more stable year over year."
State Fund had a $478 million underwriting loss in 2016 compared to a $483 million underwriting loss in prior year. The 2016 underwriting loss decreased due to lower losses incurred resulting from reduced new claims reported and claims inventory compared to prior year. Its combined ratio was 130.2 percent.
However the underwriting loss of $478 million was offset by investment income of $627 million for the year producing an overall net profit for the year.
State Fund maintained a balanced investment portfolio that was focused on both credit quality and investment yield (93% of the $18.9 billion bond portfolio was rated NAIC 1, the NAIC's highest quality credit class). The weighted average credit quality of the overall bond portfolio was Aa2/AA- by Moody's and Standard & Poor's, respectively. Book yield at December 31, 2016 was 3.32%, down from 3.53% at December 31, 2015.
In 2016, State Fund reached successful resolutions with most of the defendants in two Racketeering Influenced and Corrupt Organizations Act (RICO) suits filed in 2013 (the few outstanding plaintiffs were successfully resolved in the first quarter of 2017).
The purpose of the suits was to expose and prosecute a complex fraud scheme that was being perpetrated by a number of medical vendors in the California workers' compensation system.
In settling these cases, it claims to have achieved some important benefits for injured workers. Many of the doctors involved will no longer treat our injured workers and will transfer care of their current patients. They also agreed to waive more than $40 million in liens at the Workers' Compensation Appeals Board.
The National Health Care Anti-Fraud Association (NHCAA) honored State Fund's Special Investigations Unit with their 2016 Investigation of the Year award. This award cited the Unit's contributions to an FBI investigation that exposed a widespread workers' compensation insurance bribery and fraud scheme, and resulted in 13 indictments.
SCIF doubled its annual fraud restitution collection rates to more than $2.1 million, which helps level the playing field for California businesses. Read More...