March 21, 2018

ACIC: Jones and WCIRB Pure Premium Benchmark Revamp is “Right Move”

SACRAMENTO, California – California Insurance Commissioner Dave Jones and the Workers Compensation Insurance Rating Bureau (WCIRB) are making the right move by reassessing how the pure premium rate is calculated, says the Association of California Insurance Companies (ACIC).

“Twice a year the WCIRB advises the insurance commissioner on how costs are developing within California’s workers compensation system and the commissioner then advises insurers whether they should raise, lower or maintain rates,” said Mark Sektnan, ACIC president. “Unfortunately, the previous insurance commissioner allowed the pure premium advisory rate process to be politicized and he refused to take action on the increasing cost trends in the system in order to preserve his own political profile while seeking higher office. This inability to make a decision distorted the process and gave businesses and the public misinformation about workers compensation rates. Commissioner Jones is wise to change the process so businesses are not unnecessarily confused or worried about potential premium increases.”

Previously, the WCIRB recommended rates benchmarked to the approved pure premium rates. However recommended changes to the pure premium rates were not approved for over two years. Now Commissioner Jones has directed the WCIRB to instead compare the January 1, 2012 rates against the average insurer filed pure premium rate. Using this new method, the average pure premium rates proposed in the filing discussed in today’s hearing is $2.33 per $100 of payroll. This is 1.8 percent less than the pure premium rates filed in July 2011.

“Commissioner Jones has asked the WCIRB to compare rates to what is really being charged in the market,” said Sektnan. “This is a prudent and appropriate step to take that will avoid confusion for employers struggling to pay bills and keep the doors open during these difficult economic times. Additionally, the new process will give an accurate snapshot of the market and help focus attention on cost drivers in the system.”

“Before the workers compensation reforms were enacted in 2003 and 2004, employers were paying $6.29 per $100 of payroll. As of July 2011, employers are paying an average of $2.27 per $100 of payroll,” said Sektnan. “It is vital during this rocky economy that employers get a realistic projection of what their costs will be to protect their employees from work place injuries. This new system will enable insurers to accurately predict costs and keep a watchful eye on the areas where costs are increasing. It is more important then ever for California to have a workers’ compensation system that an employer can pay for and a system that efficiently and fairly delivers benefits to injured workers.”

“As we approach the 2012 legislative session, any discussions about benefit increases need to be balanced with hard dollar cost saving proposals,” said Sektnan. “The new pure premium rate process spearheaded by Commissioner Jones will help all stakeholders understand the true costs of California’s workers’ compensation system.”

Source: ACIC/PCI

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