-Partners in Practice -
INSURANCE MARKET UPDATE	JUNE 1995

Effective January 1, 1995, the State of California abandoned its mandatory workers' compensation rate structure and replaced it with what is known as "open" rating. This is good news, for the change brings rate competition to the marketplace in California for the first time ever. The bottom line? You can expect lower rates.

To take maximum advantage of the opportunities afforded by open rating, we would urge you to seek quotes in the Kemper group program for California architects and engineers. We believe this historically superior program will continue to produce superior results. This Insurance Market Update explains why.

Companies with a history of efficient management of group programs and better than average underwriting results (lower losses) are positioned to compete more effectively than those with little or no experience or less restrictive underwriting policies. In the past, dividends have been paid from group profits, and the dividend history of companies offering workers' compensation insurance to architects and engineers on a group basis in California is a good measure of their relative competitive strength going into a very new rate environment.

Currently, five group programs are available to small and medium-sized firms. Here are the companies which offer them, the A.M. Best's rating assigned to each, and the underwriting results achieved over time as measured by policyholder dividends actually paid (remember, the rates charged at the time were the same):

	Best's	Average Dividend Paid
Underwriter	Rating	5 Years	10 Years
Kemper (California Group)	A+(XV)	42.28%	40.86%
Fireman's Fund	A(XIV)	21.52%	22.23%
Legion (Formerly Hartford)*	A-(VII)	28.62%	21.74%
Kemper (National Group)	A+(XV)	16.60%	16.92%
California Compensation (CalComp)	B(VII)	- -**	- -**

* Dividends not yet declared for 1993. Assumes 27%. ** N/A. Program initiated in mid-1994.

In the past, superior underwriting results have produced benefits to insureds in the form of dividends. This year, it can be expected that prospective dividends will be mortgaged against lower rates going in. But, the rates that are quoted are not likely to mean much over time in the absence of an understanding of the financial strength, the services, and the dividend history of the company that stands behind them.

In the current competitive environment, the most viable alternative is likely to be less than self-evident. We expect it will be obscured by intense, if short term, rate competition for market share. How can you make sense of it all? Arm yourself with sound professional advice, and approach this market with caution.

The Kemper California Group has been the most cost effective group alternative available in every year of the past ten. We expect highly competitive rates from Kemper this year, but more importantly, we believe the Kemper program will continue to demonstrate superior results well into the future. With the others, there is less cause for optimism. Why? The following table traces the conversion of historical dividends (arguably, the principal amount available for rate reduction) to competitive, current rates. It should help to clarify the competitive situation in which each of the companies finds itself:

* Ten year historical average. ** As established by the California Insurance Commissioner.

If you are not now insured in the Kemper California Group, we would be pleased to approach the underwriters on your behalf. We may be able to help you qualify. To simplify the process and eliminate some of the confusion surrounding the classification of estimated payroll, call us at (415) 360-5900 or send us an e-mail and request an annotated worksheet.

	Professional Practice Insurance Brokers, Inc.
10 California Street Redwood City, CA 94063 (415) 369-5900	4401 Colwick Road Suite 700 Charlotte, NC 28211 (704) 365-0900	540 Frontage Road Suite 3030 Northfield, IL 60093 (847) 441-0210	2244 West Coast Highway, Suite 200 Newport Beach, CA 92663-4724 (714) 729-0700
© 1996, Professional Practice Insurance Brokers, Inc. This newsletter is published as a professional liability loss prevention service to PPIB clients and friends. It is intended for use by architects and engineers as an information resource. It is not intended to afford legal or insurance advice or opinion. Readers are urged to consult competent legal and insurance counsel for assistance in applying the information presented here to their own unique circumstances.

For inquiries or problems please contact us via e-mail at Earleen Thomas or call us directly at 800-705-7742.
© 2000 Hilb Rogal & Hobbs Professional Practice Insurance Brokers, Inc. All Rights Reserved. California License #0641361.