Workers' Compensation Proposed Rate Increase
Issue #68
August, 18, 2008
The Workers' Compensation Insurance Rating Bureau of California (WCIRB) announced last week it would submit a filing to the California Department of Insurance (CDI) recommending a 16 percent increase in pure premium rates effective Jan. 1, 2009.
According to WCIRB, approximately 10.8 percent of the recommended increase is due to increasing medical costs, 2.8 percent is due to increased loss adjustment expenses, and 1.8 percent is due to the annual adjustment to the experience rating off-balance correction factor.
After reviewing the claims data for the past two years, WCIRB determined that medical claim's costs were increasing at seven percent, prompting them to increase the medical cost trend to five percent from one percent in the last rate filing.
“We have seen medical claim's costs increasing by almost every measure," said Jack Hannon, WCIRB spokesman. He said WCIRB would have more information on exactly what is contributing to the increase in time for the department of insurance’s public hearing on Sept. 16.
If the WCIRB’s pure premium rate recommendation is approved as filed, WCIRB expects the average Jan. 1, 2009 pure premium rate will be $1.95 per $100 of payroll, comparable to the average Jan. 1, 2007 pure premium rate of $1.96 and approximately 60 percent below the average pre-reform pure premium rate of $4.81.
The recommended 16 percent increase in pure premium rates does not reflect the cost impact of the recent changes to the Permanent Disability Rating Schedule (PDRS) proposed by the Division of Workers’ Compensation. If the DWC proposed changes to the PDRS are adopted, the WCIRB will amend its recommendation by proposing that (1) the Jan. 1, 2009 pure premium rates be increased by an additional 3.7 percent and (2) the approved 2008 pure premium rates applicable to the unexpired portion of 2008 policies also be increased by 3.7 percent.
While the California workers compensation insurance market remains competitive, it appears as though change is on the horizon.
Free for the asking . . . .
Kempkey Insurance Services goes beyond insurance by designing and implementing risk management programs for growth oriented businesses. We help our clients maximize the value of their insurance dollars and minimize their potential for unwanted surprises. Ed Kempkey can be contacted at (888) 536-7539 extension 2188, or at ed@kempkey.com .