California workers’ compensation costs are going up, and more quickly than you may have prepared for. Following a recommended July 1 increase of 27% to the California “pure premium” rates of its Actuarial Committee, the Workers’ Compensation Insurance Rating Bureau Governing Board Recommends 24.4% Workers' Comp Rate Increase.
The WCIRB will submit a filing to the California Department of Insurance (CDI) recommending a 24.4 percent increase in pure premium rates that would be effective July 1, 2009, for new and renewal policies. A Department hearing is set for April 28, 2009.
The recommendation is based on two principal components. According to the WCIRB, 17.6 percent of the 24.4 percent rate increase is due to worsening loss development in the workers' compensation insurance line, primarily due to high medical costs.
An additional 5.8 percent of the total 24.4 percent is an estimate of the impact of recent Workers' Compensation Appeals Board decisions (Ogilvie v. City and County of San Francisco, Almaraz v. Environmental Recovery Services and Guzman v. Milpitas Unified School District).
These cases decided last month by a 7 member panel of the WCAB created the opportunity for injured workers and their lawyers to challenge the objective basis for determining permanent disability in cases which are open for several years, the injured worker has not returned to work and is reported to be suffering significant pain. Those cases caused significant fear by insurers that permanent disability costs in California, once thought to be contained by the 2004 legislative reforms, may now skyrocket.
This rate filing is the WCIRB's first attempt to estimate the impact. It is quite possible that the 5.8 percent used now maybe on the very low-end of the range and the cost impact may actually be quite a bit higher.
If the full 24.4 percent increase is approved by the California insurance commissioner, the July 1, 2009 pure premium rates will still be, on average, 54 percent lower than the approved pure premium rates in effect July 1, 2003.
Insurance Commissioner Steve Poizner will make an initial ruling on these rates, and it is certain that he will scale back the increase, just as he did the 16% rate increase initially proposed by January 1, 2009 – which Poizner approved at only 5%. Consider that Poizner has already begun his campaign for California Governor for the 2010 Election.
Unfortunately, this 24.4% rate increase is as high as it is partially as a “catch up” from the rates Poizner artificially held down just a few months ago. Also, these rates are “advisory” and each insurance company can and will set its own rates based on its own costs and market objectives.
So what does it mean for you…
#1- part of this rate increase is being driven by employers who do not put injured workers back to work with an effective “return to work” policy. If you do have a return to work program, make sure your insurer knows about it. If you don’t, this is a darn good time to start.
#2- Take a look at your experience modification. If it is more than 80 or so, you are leaving money on the table by paying extra in your workers’ compensation premium. Sit down with someone knowledgeable and figure out what is driving your costs. #3- talk to your insurance agent or broker early, months before renewal, and discuss how you can get the best price for your next policy.
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Don Dressler Consulting has helped dozens of employers lower their experience modifications, often from 150-200 down to less than 75.
We can help you now.
Call: 949-533-3742
E-mail: info@dondressler.com
Visit our web site at: www.DonDressler.com
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