Reporting from Sacramento — In an effort to streamline operations and cut expenses, California's largest workers' compensation insurance company plans to lay off about a fourth of its 6,800 employees.
Tom Rowe, chief executive of the government-controlled State Compensation Insurance Fund, said Thursday the company is about 30% overstaffed and will fire as many as 1,800 civil service workers by the end of June.
It's the first mass layoff at the San Francisco firm since the 1930s.
"The positions being eliminated are in areas where business processes have changed significantly enough that work has been substantially reduced," Rowe said in a companywide email. "We spend more operating the company than we do on benefits to injured employees."
The layoffs are expected to save State Fund about $350 million a year.
The 97-year-old company was created by the California Legislature to act as an insurer of last resort for employers that cannot obtain the legally required workers' compensation coverage from private insurers. Last year, State Fund collected about $1 billion in premiums from about 150,000 employers.
Eight years ago, the Legislature began changing workers' compensation laws to lower costs for employers. That, in turn, led to greater competition and lower premiums — as much as 60% over that time — and enabled more companies to obtain insurance privately.
State Fund's market dominance fell to 15% last year from 52% in 2004. Premium volume is one-eighth of what it was six years ago. In the same period, the number of people working at State Fund declined only 21%.
State Fund is a state agency staffed by government workers. But it operates as an independent company and does not rely on funding from the state treasury. State Fund is governed by a board of directors, mainly appointed by the governor.