After cutting “pure premium” rates for workers’ compensation insurance in July of this year, last month the Workers’ Compensation Insurance Rating Bureau (WCIRB) Governing Committee voted to increase rates one cent next January.

The filing will propose advisory pure premium rates that average $2.01 per $100 of payroll, which is 14.3 percent less than the industry average filed pure premium rate of $2.34 as of July 1, 2017, and one cent more than the average approved July 1, 2017 advisory pure premium rate of $2.00. This tiny proposed increase follows five consecutive advisory pure premium rate decreases since early 2015 that have totaled more than 27 percent.

It still leaves California with the highest cost for workers’ comp insurance in the nation, 76 percent higher than the national average, according to the 2016 annual survey of costs by the Oregon Department of Consumer and Business Services.

The other piece of the equation is that “pure premium” rates are more of a guideline than a reality since every company’s actual rate is based on a couple things—their experience with workers’ comp claims called an X-Mod and the size of their employee base/payroll. These are the basis for companies that actually provide the insurance to make determinations about what they will charge for their services.

How We Got Here

In his presentation to the Governing Committee, Dave Bellusci, WCIRB’s executive vice president and chief actuary, noted that the indicated January 1, 2018 average advisory pure premium rate, “while slightly above” the average approved July 1, 2017 pure premium rate, is more than 7 percent below the average January 1, 2017 advisory pure premium rate.

Identifying the Problem

Bellusci identified some of the factors contributing to this reduction over the last year:
Medical losses have continued to develop downward
Claim settlement rates have continued to accelerate
Increasing loss adjustment expense trends have moderated
Increased wage growth is being forecast

Bellusci also noted that countering these favorable trends and contributing to this modest proposed increase from the average approved July 1, 2017 advisory pure premium rates are recently rising average claim severities and continued sharp growth in the volume of cumulative injuries.

Filings & Plans

The WCIRB will submitted new rate filing to the California Department of Insurance (CDI) August 18th. The CDI will schedule a public hearing to “consider” and render a decision to accept, reject or change. Then the WCIRB will post the information in their “Filings and Plans” section of the organization’s website.