WCIRB to Propose Drop in Pure Premium Rates

May 12, 2004

On Tuesday, California’s WCIRB’s Governing Committee approved the submission of a proposed reduction in pure premium rates to be effective on policies incepting on or after July 1, 2004 based on the WCIRB’s evaluation of the impact of Senate Bill (SB) 899 on system costs. The WCIRB’s evaluation of SB 899 and its proposed pure premium rates will be submitted to the insurance commissioner at the CDI public hearing to be held on Thursday, May 13.

Although the numbers are still being finalized, the WCIRB estimates that SB 899 will reduce statewide benefits costs by approximately 15%, or $3 billion and loss adjustment expenses by approximately 9%, or $0.3 billion. This estimate does not reflect the impact of SB 899 changes on the cost of permanent disability benefits, as these changes are not effective until the Administrative Director of the Division of Workers’ Compensation adopts a new permanent disability schedule. Once a new permanent disability schedule is adopted, the WCIRB will evaluate the impact of SB 899 changes on the costs of permanent disability benefits for presentation to the insurance commissioner.

The WCIRB’s proposed July 1, 2004 pure premium rates, on average, are approximately 13% to 15% less than the Jan. 1, 2004 pure premium rates proposed by the WCIRB last fall and approximately 2% to 3% less than the Jan. 1, 2004 pure premium rates approved by the insurance commissioner last fall.

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