California comp rating bureau recommends 7.8% rate cut

The California Workers’ Compensation Insurance Rating Bureau’s governing committee on Wednesday recommended that the state insurance commissioner reduce the advisory pure premium rates by 7.8% for policies incepting on or after July 1.

Citing lower medical loss and allocated loss adjustment expense development, continued acceleration in claim settlements and recent indemnity claim frequency decreases, the committee voted unanimously to authorize the Oakland-based rating bureau to submit a midyear pure premium rate filing to the California Department of Insurance, according to an update on its website on Wednesday.

The filing will propose a July 1, 2017, average advisory pure premium rate of $2.02 per $100 of payroll, which is 16.5% lower than the corresponding industry average filed pure premium rate of $2.42 as of Jan. 1, 2017, and 7.8% less than the insurance commissioner's approved average Jan. 1, 2017, advisory pure premium rate of $2.19, the rating bureau stated.

The decision was based on an actuarial committee’s analysis of insurer loss and loss adjustment experience as of Dec. 31, 2016, according to the bureau. 

“That committee noted that cumulative trauma claims continue to increase, particularly in the Los Angeles region. In addition, medical severities are beginning to increase after several years of more modest severity trends driven by Senate Bill No. 863. Despite these upward pressures on system costs, the governing committee believed that lower frequency and favorable loss and allocated loss adjustment expense development, partially driven by increases in claim settlement rates, warranted a reduction in the industry average pure premium rate as of July 1, 2017,” the update reads.

The bureau anticipates submitting its filing to the California Department of Insurance by April 14.