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California workers comp premiums could see another reduction


California regulators are proposing another reduction in average premiums for workers compensation coverage amid improving loss experience in the system.

The Workers' Compensation Insurance Rating Bureau of California recommended on Wednesday an average pure premium rate of $2.45 per $100 of payroll for Jan. 1, 2016, which is 7.8% less than the industry average premium rate of $2.66 as of July 1, 2015. The proposed rate would be 0.8% less than the average approved July 1, 2015, rate of $2.47, according to the bureau.

The average cost of indemnity and medical on lost time claims continue to emerge below prior projections for both 2013 and 2014, the bureau stated. For example, in 2012, the bureau forecast a 15.7% cumulative change in average cost per indemnity claim, but the actual change was only 9% in 2013 and 2014.

The significant decline in these claims over the last two years is likely in large part attributable to the many provisions of S.B. 863 — California's workers comp reform law — that impact medical costs, according to the bureau.

“Losses are continuing to develop favorably, recent severity growth continues to emerge below projections, and increasingly robust wage growth is being forecast,” the bureau said in its rate filing.

The bureau recommended the rate cut even though a number of factors that could raise costs bear watching, including historically high levels of loss adjustment expenses, persistently high rates of indemnity claim frequency, a still increasing number of independent medical reviews being requested, a spike in lien filings in early 2015 and persistent increases in temporary disability duration.

The proposed rates have been submitted to the California Insurance Commissioner for approval, but are advisory only, meaning insurers are not bound by the recommendations.