In recent workers' compensation defense news, the organization that advises California's insurance commissioner on workers' compensation base rates is currently pushing a substantial rate increase.
According to multiple sources, the Workers' Compensation Insurance Rating Bureau (WCIRB) recommended a 4.1 percent mid-year increase in the workers' compensation rates that insurance companies charge employers across the state.
In a letter to Insurance Commissioner Dave Jones, WCIRB indicated that this increase in workers' compensation base rates would raise premium costs from $2.41 for every $100 of payroll to $2.51 for every $100 of payroll.
The proposed 4.1 percent increase would affect all new and renewed policies starting in July.
According to WCIRB, there are multiple reasons as to why the increase is necessary, including:
- Increased litigation involving permanent disability claims
- Increased cumulative injury claims
- Slow economic recovery
Under the current system, WCIRB advises the Insurance Commissioner on workers' compensation pure premium rates several times a year, recommending either increases or decreases. The Insurance Commissioner is then free to either accept or reject these recommendations when advising California's licensed workers' comp companies on rate adjustments.
In addition, California's 400 licensed workers' comp companies may also accept or reject WCIRB's recommendations and establish their own rates. (They typically use the Insurance Commissioner's recommendations as their primary benchmark.)
When making its recommendations regarding pure premium rates, WCIRB previously relied upon approved pure premium rates. However, thanks to a recent directive by Commissioner Jones, WCIRB must now consider the average insurer-filed pure premium rate (i.e., the current market rate) when making its calculations/recommendations.
(Pure premium rates are figures that reflect the actual or anticipated costs to insurers stemming from indemnity payments and other allocated losses; overhead costs and profits are not included in the calculation)
Stay tuned for further developments in the area of workers' compensation defense law ...
Sources:
Risk & Insurance, "California rating bureau seeks midyear premium increase," April 30, 2102
North Bay Business Journal, "4.1 percent workers comp increase proposed," Dan Verel, April 23, 2012
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