Insurance Commissioner Dave Jones Issues Advisory Claims Cost Benchmark
News: 2012 Press Release
The advisory Workers' Compensation Claims Cost Benchmark measures the cost of workers' compensation claims and the expenses to adjust those claims over the next policy year for workers' compensation insurance and is an average of approximately 500 classification pure premium rates. The Workers' Compensation Insurance Rating Bureau (WCIRB), a private rating organization for all California workers' compensation insurance companies, files a recommended level of the Benchmark to be reviewed and approved by the Insurance Commissioner. On April 12, 2012, the WCIRB recommended an increase in the pure premium rate level as a result of unexpected rise in projected claims costs and expenses. The WCIRB provided the following information in its filing:
- As of January 1, 2012, insurers filed an average pure premium rate level of $2.41 per $100 of employer payroll as their estimates of the projected costs and expenses for policies to be written in 2012.
- Insurers only charged employers on average $2.39 per $100 of payroll during 2011.
- Based upon the WCIRB's review of insurance company data and rate filings made with the Department, insurance company filed manual rates, which are the filed standard cost for a standard risk before any discounts or surcharges are applied and include the pure premium rates, averaged $3.39 per $100 of employer payroll. The difference between the $3.39 manual rate and the $2.39 charged to employers is as a result of substantial premium discounting being done by insurers.
- As a result of increasing costs and expenses, the WCIRB recommended an increase of the average pure premium rates to $2.51. The increase primarily is due to increased medical costs and medical cost containment expenses.
On May 29, 2012, the Commissioner issued his advisory Claims Cost Benchmark following the review and a public hearing on the WCIRB's filing. The Commissioner advised that the Benchmark would be adequate at $2.49 per $100 of payroll and approved the WCIRB's pure premium rates at that level. The pure premium rates filed by insurers for January 1, 2012, however, averaged $2.41 per $100 of payroll, representing an increase of 3.3 percent.
These figures are not predictive of an individual employer's insurance premium. Actual premiums may differ greatly from these figures based upon an employer's business, the mix of employees and operations, and the employer's actual claims experience. To determine an individual employer's premium from either these figures or the Commissioner's determination on pure premium rates is not possible since these are measurements of the costs for the California workers' compensation insurance system.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $259 billion in premiums annually in California. In 2015 the California Department of Insurance received more than 155,000 calls from consumers and helped recover over $84 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.