San Francisco, CA – The WCIRB has submitted its January 1, 2012 Pure Premium Rate Filing to the California Department of Insurance (CDI) containing pure premium rates proposed to be effective January 1, 2012. These pure premium rates represent the anticipated cost of losses and loss adjustment expenses expected to be incurred on policies incepting on or after January 1, 2012.
In prior filings, the WCIRB proposed rates that were benchmarked to the approved pure premium rates; however, this has led to a misunderstanding among the public that a change in the approved pure premium rates will have a direct and commensurate impact on the rates filed and charged by insurers. In order to mitigate this misunderstanding and provide more meaningful information regarding insurer rates, the pure premium rates proposed in this filing are benchmarked to the average insurer filed pure premium rate and additional information regarding industry average filed and charged rates is provided in the WCIRB’s filing.
The average of the 494 classification pure premium rates proposed in the filing is $2.33 per $100 of payroll. This average proposed pure premium rate is 1.8% less than the corresponding average of insurer filed pure premium rates of $2.37 as of July 1, 2011.
Proposed and Industry Average Rates Per $100 of Payroll
System Costs Continue to Escalate
While 2012 projected cost levels remain below their pre-reform highs and the proposed average pure premium rate is slightly less than the industry average filed pure premium rate, the proposed pure premium rates reflect significant deterioration in projected losses and loss adjustment expenses as well as less optimistic economic forecasts as compared to one year ago. The deterioration in losses and loss adjustment expenses is primarily attributable to (a) a significant increase in projected allocated loss adjustment expenses, (b) continued adverse loss development on recent accident years, and (c) increased claim frequency on the 2010 accident year.
The increase in loss adjustment expense, which represents the costs associated with handling claims, is of particular concern to system stakeholders. The 55% increase is believed to be caused by an increase in the volume of liens, the impact of the 2009 WCAB decisions in Ogilvie v. City and County of San Francisco and Almaraz v. Environmental Recovery Services/Guzman v. Milpitas Unified School District, and an increase in the rates of representation of injured workers.
In addition to pure premium rates, the filing includes proposed amendments to the California Workers’ Compensation Uniform Statistical Reporting Plan – 1995, the Miscellaneous Regulations for the Recording and Reporting of Data and the California Workers’ Compensation Experience Rating Plan – 1995. These proposed amendments are detailed in Part B of the filing.
The CDI will conduct a public hearing on the matters contained in the WCIRB’s Filing. It is expected that the CDI will announce the date of the hearing within the next week. Once the date, time and location of the hearing are set, the WCIRB will add that information to its website.
The Filing and all related information may be viewed, printed and downloaded from the Regulatory Filings section of the WCIRB website.
To learn more about workers’ compensation pure premium rates, see the “Rates You Pay” educational module located in the Helpful Information section of the website. See Helpful Information > WCIRB Guide to Workers’ Compensation Insurance > The Rates You Pay.