California Insurance Commissioner Steve Poizner hosted a pure premium rate advisory hearing on the recommended 16 percent increase in the pure premium rate by the Workers’ Compensation Insurance Rating Bureau (WCIRB) on Sept. 16, 2008.
“I am pleased the workers’ compensation insurance marketplace remains competitive and stable,” said Commissioner Poizner. “However, data appears to show that there has been an increase in the costs in the workers compensation system – especially in medical costs. I will closely analyze the data to determine whether an increase in the pure premium rate is necessary. In the last year, I asked for specific reforms to the system to create efficiencies and to help contain costs. I look forward to receiving updates during the hearing on the status of those changes.”
The insurance commissioner has 30 days after the close of the record to issue the pure premium rate advisory, which is a recommendation used by the workers’ compensation insurance industry as a benchmark for filing its rates.
WCIRB data forecasts that medical costs will increase approximately 11 percent. Insurers’ loss-adjustment experiences have moderated, although a number of claims are maturing at higher-than-anticipated expense.
In May 2008, Commissioner Poizner, citing forecasted marketplace stability, did not issue an interim pure premium rate advisory — the first time in six years an interim pure premium rate advisory was not issued by a California insurance commissioner.
In January 2008, Commissioner Poizner recommended no change in workers’ compensation insurance rates based upon his review of the data provided by WCIRB at that time.
In 2007, the commissioner called for a 14.2 percent decrease in workers’ compensation pure premium rates. Since Jan. 1, 2004, the pure premium rate has cumulatively decreased 65 percent.
Also in 2007, Commissioner Poizner ordered various reforms to reduce rates by improving workplace safety and the accuracy of rate forecasting. To date, WCIRB:
–Hired external actuaries to review its pure premium rate methodology — it is now utilizing more modern techniques; and
–Formed a task force to overhaul its experience rating system, which had gone unmodified for more than 12 years — CDI will hold a workshop, including public comment, in February 2009 to formally review a report on improving the experience rating system.
Commissioner Poizner also convened a blue-ribbon fraud task force, which included effective ways to fight workers’ comp fraud; the report can be found online at http://www.insurance.ca.gov/0300-fraud/upload/FraudTaskReport05-08.pdf.
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