Sacramento, CA – Insurance Commissioner Ricardo Lara recently adopted and issued a new and decreased rate for workers’ compensation insurance that reflects California’s growing economy. The Commissioner’s action lowers the benchmark rate to $1.46 per $100 of payroll for workers’ compensation insurance representing a 2.6 percent decrease from last year and which will go into effect on September 1, 2023.
Consistent with both benchmark rates approved by the Commissioner in 2021 and 2022, this rate does not include a COVID-19 factor. Commissioner Lara will continue to review data in future pure premium rate filings to determine the long-term impact of COVID-19 claims as well as other experience data.
“While our economy continues to grow, insurance companies should be sharing the savings and benefits of increased stability with California’s businesses and workers,” said Commissioner Lara. “This year’s rate continues the pre-pandemic trend of decreasing costs brought on by workers’ compensation reform.”
The market is stabilizing as the overall system continues to recover from disruptions caused by COVID-19. Key factors in the Commissioner’s decision include faster settlement of injured workers’ claims, a decrease in the number of medical services needed for each claim, and a lower percentage of claims with permanent disability benefits. After considering the healthy state of the workers’ compensation market, overall economic conditions, and his staff’s actuarial projections concerning long-term and short-term trends, Commissioner Lara concluded that a reduction in the average pure premium rate is reasonable and appropriate at this time.
Commissioner Lara’s decision results in an average advisory pure premium rate that is below the $1.50 average rate proposed by the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) in its filing with the California Department of Insurance. Commissioner Lara issued today’s advisory rate after a virtual public hearing that he convened on June 7, 2023 and careful review of the testimony and evidence submitted by stakeholders.
The Commissioner’s recommended rate is based on insurance companies’ cost data, trends, and recommendations made to him by the Department workers’ compensation experts. The pure premium rate is only advisory, as the Commissioner does not have statutory rate setting authority over workers’ compensation rates. The average advisory pure premium rate level of $1.46 approved by the Commissioner is about 14.6 percent lower than the industry-filed average pure premium rate of $1.71 as of January 1, 2023.