If this number is to be believed (and it can be documented), one need only subtract agency commissions from the remaining 26% to realize that WC in California is a LOSER!! Agents are getting 10%-15% of premium leaving carriers with the remaining 11%-16% to do EVERYTHING else including taking the risk. Seems like a recipe for disaster over the long term for this line of business.
Short sightedness must be a pre-requisite for political office (and we all know it is). I really thought Mr. S, though, had more business acumen than he is showing with this latest opinion. Perhaps he needs a lesson in insurance economics from his advisors.
Rates go up, rates go down it is just the way it is in many markets. The cost spread is still staggering between carriers for the same accounts. Just this month our clients saw spreads in premium from $295,000 down to $197,000 and no matter if rates go up there is still good competition and opportunity to those who know where to look. Politicians must at the very least look like they are making a fight for the people – the true fight is when businesses become knowledgeable and take action with their own companies those that do win the game.
Thanks for the recent article about the proposed rate increase recommendation by the Workers’ Compensation Insurance Rating Bureau. Having been an insurance agent/broker for the past 30 years, I have seen many Workers’ Comp rate swings both up and down. I believe that the real issue is the uncertainty that comes with rising costs or perceived rising costs within the seriously flawed system.
The problem is not with medical costs or new benefits the legislature would like to provide to injured workers, the problem is that the insurance industry does not know how it will affect them because they do not know if the rates they have filed will be adequate to return them a profit. This all comes back to the fact that the 100 year-old system is payroll based.
The payroll based system develops a premium as a function of an estimated annual payroll. The insurance carrier does not know what the actual payroll is until some time after the end of the policy year. The state does not even begin to evaluate the adequacy of the rates until the insurance carrier submits the actual payroll and claims at 6 months following the expiration of the policy. The WCIRB will release the final year-end results for the 2007 year some time this summer…
With this economy, employers have reduced payroll to their employees in order to continue employment for everyone. Others have provided additional time off in lieu of pay. Still others are trying to make some workers independent contractors instead of employees. All of these things tear at the integrity of the payroll based system and affect the actual premium collected by each insurance carrier. The reaction – major rate increases to cover the uncertainty of this flawed system.
Under the current system, an employer pays more premium for the higher compensated more experienced worker that is less likely to become injured on the job than the new hire. Under the current system the employer fights higher wages as one of the additional frictional costs is Workers’ Comp. Under the current system, a highly compensated design engineer that spends one hour a day out in the shop dealing with the machinist will have 100% of his annual payroll go into the much higher machinist classification.
The solution is to change the payroll based system to a time based system. The technology is already out there. Many employers have time and attendance systems in place that gather information in order to pay their employees. A time based system would provide real-time information both to the insurance carrier and the state regulator to determine rate adequacy. A time based system would not punish an employer for giving employees a raise. A time based system would fairly charge an employer for the time employees spent in the high hazard areas of the work place as well as the low hazard areas. Pretty hard for a machinist to be injured by his machine while attending an employee meeting in the conference room…
The legislature would be more able to increase benefits if they had good information as to what impact the new benefits would have on the industry. State regulators would be more able to manage the industry with good, accurate, and timely data. No longer would we be discussing a 30% rate increase.
The State of Washington already uses time as the rating basis for Workers’ Compensation however, they have not begun to make use of the existing technology to gather the information real-time.
I would be happy to discuss this further with you. I hope that you might take a few minutes to explore these ideas including asking an employer what they think.
If this number is to be believed (and it can be documented), one need only subtract agency commissions from the remaining 26% to realize that WC in California is a LOSER!! Agents are getting 10%-15% of premium leaving carriers with the remaining 11%-16% to do EVERYTHING else including taking the risk. Seems like a recipe for disaster over the long term for this line of business.
Short sightedness must be a pre-requisite for political office (and we all know it is). I really thought Mr. S, though, had more business acumen than he is showing with this latest opinion. Perhaps he needs a lesson in insurance economics from his advisors.
Rates go up, rates go down it is just the way it is in many markets. The cost spread is still staggering between carriers for the same accounts. Just this month our clients saw spreads in premium from $295,000 down to $197,000 and no matter if rates go up there is still good competition and opportunity to those who know where to look. Politicians must at the very least look like they are making a fight for the people – the true fight is when businesses become knowledgeable and take action with their own companies those that do win the game.
Andrea Luoni
RateCraft.com
Yeah that’s what we need more expenses for employers? It’s not like our unemployment rate in CA is high enough…
These businesses would not be happy if the governor regulated their prices.
Just the other day, I saw a suit that I thought should be 30% lower in price. The plumber charged $100 for a $70 job, in my opinion.
I’ll call the governor.
Thanks for the recent article about the proposed rate increase recommendation by the Workers’ Compensation Insurance Rating Bureau. Having been an insurance agent/broker for the past 30 years, I have seen many Workers’ Comp rate swings both up and down. I believe that the real issue is the uncertainty that comes with rising costs or perceived rising costs within the seriously flawed system.
The problem is not with medical costs or new benefits the legislature would like to provide to injured workers, the problem is that the insurance industry does not know how it will affect them because they do not know if the rates they have filed will be adequate to return them a profit. This all comes back to the fact that the 100 year-old system is payroll based.
The payroll based system develops a premium as a function of an estimated annual payroll. The insurance carrier does not know what the actual payroll is until some time after the end of the policy year. The state does not even begin to evaluate the adequacy of the rates until the insurance carrier submits the actual payroll and claims at 6 months following the expiration of the policy. The WCIRB will release the final year-end results for the 2007 year some time this summer…
With this economy, employers have reduced payroll to their employees in order to continue employment for everyone. Others have provided additional time off in lieu of pay. Still others are trying to make some workers independent contractors instead of employees. All of these things tear at the integrity of the payroll based system and affect the actual premium collected by each insurance carrier. The reaction – major rate increases to cover the uncertainty of this flawed system.
Under the current system, an employer pays more premium for the higher compensated more experienced worker that is less likely to become injured on the job than the new hire. Under the current system the employer fights higher wages as one of the additional frictional costs is Workers’ Comp. Under the current system, a highly compensated design engineer that spends one hour a day out in the shop dealing with the machinist will have 100% of his annual payroll go into the much higher machinist classification.
The solution is to change the payroll based system to a time based system. The technology is already out there. Many employers have time and attendance systems in place that gather information in order to pay their employees. A time based system would provide real-time information both to the insurance carrier and the state regulator to determine rate adequacy. A time based system would not punish an employer for giving employees a raise. A time based system would fairly charge an employer for the time employees spent in the high hazard areas of the work place as well as the low hazard areas. Pretty hard for a machinist to be injured by his machine while attending an employee meeting in the conference room…
The legislature would be more able to increase benefits if they had good information as to what impact the new benefits would have on the industry. State regulators would be more able to manage the industry with good, accurate, and timely data. No longer would we be discussing a 30% rate increase.
The State of Washington already uses time as the rating basis for Workers’ Compensation however, they have not begun to make use of the existing technology to gather the information real-time.
I would be happy to discuss this further with you. I hope that you might take a few minutes to explore these ideas including asking an employer what they think.
Thanks,
Tom Quirk