Agency Outlines Ways California Firms Can Control WC Insurance Costs

August 17, 2012

Insurance agency Barney & Barney has outlined a series of steps to help California’s small- to mid-sized employers control the rising cost of workers comp insurance following Wednesday’s decision by the state’s Workers Compensation Insurance Rating Bureau (WCIRB) to raise rates by 12.6 percent beginning January 13, 2013.

The WCIRB-recommended rate increase has not yet been ratified by California Insurance Commissioner Dave Jones, but if approved, the pure premium rate will have increased by 58 perent since January 1, 2011.

“California employers shouldn’t panic, but they do need a coordinated strategy to help offset the certain rise in workers compensation premiums,” said Barney & Barney’s Jeffrey Cruz, the firm’s workers compensation specialist. “Through careful analysis and planning, it’s possible to neutralize some of the premium increases.”

For employers not large enough to qualify for a self-insured or large deductible program, a key cost-saving strategy is controlling the experience modifier (ex mod). The ex mod is a risk factor used by carriers to either increase or decrease the standard premium. Employers with an ex mod above “1” will pay more than the standard premium; those below “1” will pay less. Ex mod can be lowered by reducing claim frequency and claim severity.

Cruz also recommends the following strategies to mitigate the rate increase in future years:

  • Implement and monitor loss-control and safety programs that target the reduction of claim frequency.
  • Institute a formal return to work program to help reduce the costs associated with temporary disability benefits.
  • Know your open claims and negotiate lower reserves by holding regularly scheduled claim reviews.
  • Consult industry experts with staff that have extensive claim management and loss control experience to reduce the ex mod.

“While it is becoming more expensive to purchase workers comp insurance in California, most employers with credit ex mods, strong loss-control programs and low workers comp loss histories will not experience a 58 percent rate increase,” Cruz said. “For employers, it is essential to have a credit mod and negotiate additional credits and discounts whenever possible to lower the effective net rate.”

Barney & Barney LLC is a risk management and insurance brokerage headquartered in San Diego, with offices in San Francisco and Orange County.

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