Calif. Commissioner Approves No Change in Workers’ Comp Pure Premium Rates

November 29, 2007

California Insurance Commissioner Steve Poizner has issued a decision approving no overall change to the state’s advisory pure premium workers’ compensation rates for 2008.

On Sept. 20, 2007, the Workers Compensation Insurance Rating Bureau of California proposed to the Commissioner an average 4.2 percent increase in advisory pure premium rates effective Jan. 1, 2008. On Oct. 19, 2007, the WCIRB amended its filing to reflect the cost impact of the recently enacted Assembly Bill No. 338. Specifically, the WCIRB’s amended filing proposed an average 5.2 percent increase in pure premium rates, in lieu of the 4.2 percent increase originally proposed. A public hearing concerning the WCIRB’s filing was held on Oct. 23, 2007.

Poizner said the workers’ compensation insurance market is enjoying historically high profitability. The workers’ compensation reforms of 2003 have resulted in dramatic decreases in costs and increases in profitability for insurers. And based on his department’s extensive review and analysis, he decided there should be no change to the workers’ compensation pure premium Rates.

“It’s great news that California’s workers’ compensation insurers are enjoying a robust market and extraordinary profitability,” he said. “Costs to insurers have plummeted 70 percent since 2003. This represents a tremendous savings that should allow insurers to give businesses additional relief in the form of lower rates. It is clear that the runaway cost of claims to insurers has stabilized. This stability, coupled with a competitive marketplace, should allow insurers to lower premiums that I believe are still too high. Businesses must also benefit from the decrease in costs to the system. Based on my assessment of the current market, I have determined that there should be no change to the pure premium rates.”

While the Insurance Commissioner approved no overall change to the advisory pure premium rate level, pure premium rates for individual classifications will change (some higher and some lower) based on the approval of new classification relativities.

Twice each year the Commissioner assesses the state of the workers’ compensation system and issues a pure premium advisory rate. While many insurers use this as a benchmark, they are not required to follow the recommendation. The actual rates charged to employers by insurers, as filed with the Department of Insurance, decreased by 55 percent since January 2003.

Source: CDI, WCIRB

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