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Member, Beacon International Group, Ltd.
SAN FRANCISCO—The Workers' Compensation Insurance Rating Bureau of California on Thursday said it will call for a pure premium rate decrease of 1.8% under a new loss cost calculation method.
If adopted by California's Department of Insurance, the suggested rate decrease would take effect Jan. 1, 2010.
The recommendation for a pure premium rate decrease, however, comes after at least two years of the WCIRB seeking a double-digit increase. But as directed by California Insurance Commissioner David Jones, the WCIRB changed its method of determining pure premium rates for 2012.
It now sets its proposed rates by benchmarking to the average rates insurers file with the insurance department and by considering underlying system costs.
That differs from the past method of relying more on a comparison of current advisory pure premium rates.
The new rates the WCIRB is proposing for about 500 industry classifications are projected to average $2.33 per $100 of payroll. That is 1.8% less than the corresponding average of insurer-filed pure premium rates as of July 1, 2011, it said.
But although the WCIRB is recommending a pure premium rate reduction, it also said in a statement that its proposed rates reflect continued insurance cost increases since California adopted reforms from 2002 through 2004.
“Specifically, since 2005, the average cost of medical per indemnity claim has increased by 40%, the average cost of indemnity has increased by 31%, and the average cost of allocated loss adjustment expense per indemnity claim has increased by 55%,” the WCIRB said.