CTK E-Bulletin:
WCIRB Says 29.6% Rate Increase!

Many of you have heard about the recent Pure Premium rate increase recommendation by the WCIRB. Several clients have contacted us to ask what that means for workers’ compensation rates in 2011. Does that mean a 29.6% rate increase is in store?  The answer is, probably not. Let me explain a little about what Pure Premium rates are and what happens next in the rate filing process.

First, the WCIRB officially submitted a pure premium rate filing to the California Insurance Commissioner today, recommending among other things, a 29.6% increase in pure premium rates. Pure premium rates are not the rates you pay on your workers’ compensation policy, but are a “claims cost benchmark.” These pure premium rates are a benchmark number that insurance carriers may use as a tool for determining where to set their own rates for 2011. These rates are a guideline and a tool for carriers to use.

The proposed rate increase is based upon the WCIRB’s analysis of statewide accident year experience valued as of
March 31, 2010 and reflects the loss and loss adjustment expenses expected to occur on policies written in 2011.   This is the third increase in excess of 20% that the WCIRB has proposed in pure premium rates in the last year and a half. However, even if the full 29.6% increase is approved by the Insurance Commissioner, pure premium rates would still be 53% lower, on average, than they were in 2003. So that puts the pure premium rates in perspective.   

Also, the insurance commissioner often rejects the WCIRB’s recommendations, and there are hearings on these recommendations that will be held starting September 28, 2010. 

Does this mean that there will be a 29.6% increase in policy rates beginning January 1, 2011? Probably not. Then what does this mean for rates in 2011?  Before the end of the year, the California Dept. of Insurance (CDI) will also make a rate recommendation. Last January, the commissioner completely rejected the WCIRB’s recommendation and said that no rate increase was warranted. That insurance commissioner was Steve Poizner, who was preparing to run for governor at the time. Not that I am implying that one affected the other.

Based on the WCIRB’s pure premium rate recommendation and the CDI’s rate recommendation that will occur later in the year, the individual carriers will make their 2011 rate filings, most likely in December.  My opinion is that the recent trend of modest rate increases filed by most carriers for 2009 will continue. The cost of an average claim continues to rise, and medical costs continue to grow.   However, carriers are still generally eager to keep existing accounts and write new ones. So all factors considered, I think most staffing firms will see a modest rate increase on their 2011 renewal. If you have any questions about the rates, or your own workers’ compensation outlook, please don’t hesitate to contact us and we will be happy to discuss your specific situation with you.       

Rich Siemer - President

1240 North Lakeview Avenue, #240, Anaheim, California 92807 P 714.779.2000 F 714.779.4129