Important Information Regarding Workers Compensation Rate Hikes

The California Workers Compensation Rating and Inspection has issued the following announcement:

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WCIRB PROPOSES 24.4% INCREASE IN PURE PREMIUM RATES EFFECTIVE JULY 1, 2009
March 27, 2009

Today, the WCIRB submitted a pure premium rate filing to the California Insurance Commissioner recommending a 24.4% increase in advisory pure premium rates with respect to new and renewal policies as of the first anniversary rating date of a risk on or after July 1, 2009.

The recommended increase in pure premium rates is based upon (1) the WCIRB’s evaluation of loss and loss adjustment expense experience as of December 31, 2008 and (2) the WCIRB’s analysis of anticipated cost increases stemming from two recent Workers’ Compensation Appeals Board en banc decisions (Ogilvie v. City and County of San Francisco and Almaraz v. Environmental Recovery Services / Guzman v. Milpitas Unified School District). If adopted by the Insurance Commissioner, the average July 1, 2009 pure premium rate would be approximately 54% below the pre-reform rates in effect July 1, 2003.

A public hearing on the matters contained in the WCIRB’s filing will be held Tuesday, April 28, 2009 at 10:00 AM in the 22nd Floor Hearing Room at the California Department of Insurance office located at 45 Fremont Street in San Francisco, California.

https://wcirbonline.org/wcirb/Home.aspx

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Response by Elliot Katzovitz

What does this mean exactly?

Basically,  the bureau believes that the actual underlying cost of claims is rising and that rates need to go up to reflect these increased costs. When the WCIRB recommended a 12% increase in October of last year, Steve  Poizner (the current insurance commissioner),  decided to approve only  a 5% increase rather than the amount recommended. This proves that inflation is not and mandated increases to total disability claims do not lend themselves to an insurance commissioners proclamations. So the 24.4% increase reflects the actual cost increases over the past 6 months plus the 9% increase they did not get the last time around.

It is important to note that insurance companies can set their own rates but are supposed to be guided by the recommendations. What the insurance carriers choose to do is anyone’s guess.   Each company will look at their costs and evaluate their need to write additional premium. However, they will also need to be sensitive to the fact that insureds just don’t have more money to spend on insurance right now and that some premium is better than none. So, in my opinion, I  don’t believe we will see increases of this magnitude any time soon. Will there be increases to work comp rates? Probably Yes. Will these rate increases be significant? I doubt it.

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