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Workers' comp insurer State Fund to cut back operations

December 9, 2010 | 12:24 pm

Faced with a shrinking market, California's largest workers' compensation insurance company is scaling back its operations.

The $21-billion, quasi-governmental State Compensation Insurance Fund announced Thursday that it was consolidating its statewide real estate office network over the next three years.

Starting in September 2011, it will cut staffing at its Market Street headquarters in San Francisco and relocate many corporate functions to offices in Pleasanton, Vacaville and Sacramento. State Fund, as it is commonly referred to, also plans to consolidate regional claims and underwriting functions throughout the state.

The company said it expected to save nearly $200 million in operating costs over the next three years.

"In recent years, we have made strides in improving services, enhancing our customer focus and making it easier to do business with us," said State Fund Chief Executive Tom Rowe. "Now we are taking several steps to achieve our goal of greater efficiency and long-term operational stability."

The 100-year-old insurer is a state agency that operates much like a private corporation. Serving about 150,000 California employers, it's charged with being the "insurer of last resort" for employers who can't get their legally required workers' comp coverage from other companies.

State Fund has no plans to lay off any of its 7,400 workers, down from a high of about 10,000 in 2002, said spokeswoman Jennifer Vargen. However, many workers will be asked to transfer to new locations.

State Fund's business has dropped significantly because of a comprehensive overhaul of the California workers' comp system in 2003 and 2004, which created a more competitive marketplace. The effects of the 2008-09 recession also contributed to a steep drop in revenues.

State Fund currently accounts for 18% of the market, compared with a high of 52% eight years ago. Total written premiums have fallen to $1.1 billion from $8 billion in 2002.

-- Marc Lifsher