Calif. Rating Bureau Drops Workers’ Comp Advisory Rates

October 1, 2012

After a review of a workers’ compensation overhaul bill signed two weeks ago by Gov. Jerry Brown, the Workers’ Compensation Rating Bureau submitted a filing on Monday to lower the pure premium advisory rate for Jan. 1, 2013.

WCIRB submitted its pure premium rate filing to California Insurance Commissioner Dave Jones on Aug. 21 proposing rates that averaged $2.68 per $100 of payroll, or 12.6 percent higher than the industry average filed pure premium rate as of July 1, 2012. Those rates were based on March 31, 2012 premium and loss experience.

In that filing advised the rates could be amended pending the enactment of Senate Bill 863 and the receipt of insurer premium and loss experience valued as of June 30, 2012.

“The WCIRB has completed its review of June 30, 2012 insurer experience and SB 863, which was signed into law by the Governor on September 18, 2012,” the WCIRB filing states. “Loss development continued to deteriorate in the second quarter, resulting in a 2 percent deterioration in the indicated pure premium rates based on June 30, 2012 experience. In addition, the WCIRB estimates that the SB 863 provisions that could be evaluated at this time will reduce the cost of losses and loss adjustment expenses on 2013 policies by 4.9 percent. The average indicated January 1, 2013 advisory pure premium rate based on June 30, 2012 experience and the WCIRB current evaluation of SB 863 is $2.60 per $100 of payroll, which is 9.3 percent above the industry average filed pure premium rate as of July 1, 2012 of $2.38.”

WCIRB typically proposes pure premium rates consistent with the most current actuarial indication, but “given the unusually high level of uncertainty surrounding SB 863, including regulations that have not yet been promulgated, and the potential for significant additional cost savings beyond that which is currently quantifiable, the WCIRB is not recommending a January 1, 2013 increase in the advisory pure premium rate level,” the filling states.

Instead, WCIRB is proposing Jan. 1, 2013 pure premium rates that average $2.38 per $100 of payroll, which is the industry average filed pure premium rate as of July 1.

Jones is expected to schedule a public hearing to consider the WCIRB’s amended filing.

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