CA Insurance Commissioner Recommends Workers’ Comp Rate Hike of 2.8%

CA Workers Comp Rate HikeInsurers providing workers' compensation coverage should raise average base rates for 2013 by a modest 2.8 percent, California Insurance Commissioner Dave Jones advised on Friday evening.

Source: Source: Sacramento Business Journal | Published on December 3, 2012

Jones recommended a pure premium rate of $2.56 per $100 of payroll, just a small increase over the current filed rate of $2.49 per $100 of payroll.

The Workers' Compensation Insurance Rating Bureau of California, the nonprofit organization that offers its own recommendation for the commissioner to mull over before he makes his own advisory, suggested no change in pure premium rates. Although insurers' results have deteriorated, recent workers' comp reforms should generate some cost savings, the organization figured. It's still too early to know just how much, though, the Rating Bureau said.

"This is a case where the math matters and actuarial science is the critical component in determining a rate that will maintain insurers' ability to pay claims," Jones said in a news release. "We cannot afford to set the pure premium rate based on over estimates of the potential reform savings that SB 863 will bring when insurers are already paying out more in claims than they are collecting in premiums."

Workers' comp insurers are paying out 116 percent more in claims than they are collecting in premium. That, according to the news release, is a recipe for a repeat of what California saw a few years ago when many insurers went under.

"The actuarial science is clear on this matter, and while I don't have the authority to set the rates, I will advise insurers to use pure premium rates that are sufficient," Jones said.