2019 Annual Report President's Letter

The COVID-19 crisis is challenging businesses in our state in ways that are unique in our lifetimes. That's why we're focused on helping our policyholders and injured workers in every way we can. Over the last several weeks, we've taken a number of actions to provide support for our fellow Californians:

  • We placed a moratorium on policy cancellations and late payment penalties. We also extended credit to any business negatively impacted by COVID-19 events and offered them the ability to immediately adjust their payroll reporting.
  • We created the Essential Business Support Fund and the Returning California to Work COVID-19 Safety Protocol Fund. Together, these funds will provide up to $100 million to help our policyholders keep their employees safe from coronavirus.
  • We also decided to provide full benefits for essential workers who test positive for COVID-19 during the Governor's stay-at-home order, regardless of how or where they contracted the disease.

We've worked very hard over the past several years to put ourselves in a position where we can make a real difference for our customers by taking these kinds of actions. But getting here didn't happen overnight. I'd like to share with you now more about what we accomplished last year and how it has helped prepare us for today's challenges.

In 2019, we launched new technologies, we made it easier for our policyholders to do business with us, and we continued to strengthen our finances. Here's a recap of a few of the projects we focused on last year and how they have progressed:

New Technology Initiatives

We launched our new online quote and bind system for small businesses and already thousands of policyholders have bound coverage with us online. For the first time, our customers are able to find the coverage they need at any time that's convenient for them, including at night and on weekends. Simply put, we've made it easier for small businesses to work with us.

By improving some of our core policy servicing technology, we also made it easier for brokers to get quotes and bind coverage electronically, and we're spending a significant amount of time this year improving the services our brokers rely on even more.

We launched a virtual assistant that allows our customers to get quick answers to their questions about claims, medical bills, and more by chatting online. And if a customer needs more information than they can get via the virtual assistant, they can simply click a button to connect with an agent. So far, the assistant has helped thousands of customers get answers to their questions and they have told us they are very satisfied with the experience.

UR Connected—a revolutionary new technology that allows medical providers to receive real-time approvals for medical treatment—is being used by nearly 40 providers. We'll be introducing this technology to many more providers this year and we hope to see expanded adoption of this type of technology throughout the industry over time.

We rolled out telehealth services to make it easier for patients in rural areas to access high-quality medical care while reducing the time and costs associated with traveling to a doctor's office.

Innovation Design Center
We launched our new Innovation Design Center (IDC) team—reflecting a significant shift in the way we tackle challenges and embrace new technology. The team is helping us drive initiatives around an enterprise-wide chat bot, data aggregation technology for underwriting, and a new customer communication platform. And this year, the IDC is assigning "innovation business partners" to a variety of State Fund departments to help make innovation a part of our everyday planning and operational efforts.
Updated Safety and Health Services Strategy and Website
Our new and improved safety website, SafeAtWorkCA.com, launched in early 2019, and has seen a tremendous growth in traffic over the past year, a significant increase in how much time visitors spend on the site, and how many pages they visit. We recently added an exciting new feature to the site—an online Injury and Illness Prevention Plan (IIPP) builder—and will launch an online "university" within the next year as well.
Customer Experience Improvements
We continue to look closely at the ways our customers interact with us from our customer's point of view to help address their pain points and make it easier to do business with us. In 2019, we continued to improve our premium audit function and even created videos to help customers understand the process better. We also continued to work on improving the quality and efficiency of our claims processes and our customers are telling us we've made significant progress in this area.
Providing Value to Our Customers

As a not-for-profit organization, we exist solely to help our customers succeed and our injured workers recover. Since 2012, we've reduced our average charged rate by over 40%—about twice as much as the rest of the industry over that period. At the same time, our operational improvements in areas such as claims and underwriting, along with our solid investment performance, allowed us to declare $160 million in dividends in 2019.

Financial Highlights

We are as strong financially as we have ever been in my tenure at State Fund. Here are the 2019 financial highlights that are described in detail in this report:

  • Our net income before dividends was $699 million, $513 million higher than the prior year due to a significant decrease in loss and loss adjustment expense reserves of $536 million.
  • Our net investment income of $627 million was $4 million higher than prior year.
  • We wrote approximately $1.2 billion in premium in 2019, which is about 11% less than the prior year.
  • Our combined ratio was 95.5%—nearly 40 points lower than in 2018. This was driven by the loss and loss adjustment expense reserve release of $536 million.

State Fund has supported California's entrepreneurial spirit and played a vital role in the state's economy for more than 100 years. By innovating in areas such as workplace safety and injured worker care, we're committed to serving California for the next 100 as well.

Sincerely,

Vern Steiner
President & CEO