Insurance Commissioner Lara approves workers' compensation average advisory pure premium rates
News: 2020 Press Release
SACRAMENTO, Calif. — Insurance Commissioner Ricardo Lara has adopted and issued a revised average advisory pure premium rate, lowering the benchmark to $1.45 per $100 of payroll for workers’ compensation insurance, effective January 1, 2021.
This marks the tenth consecutive reduction to the average advisory pure premium rate benchmark since January 2015.
Commissioner Lara did not order an additional adjustment for COVID-19 at this time, citing the need for additional data and review by the Department of Insurance and the Workers’ Compensation Insurance Rating Bureau (WCIRB).
“The WCIRB’s thorough efforts to estimate COVID-19 costs are noted and appreciated but I am not persuaded that there is sufficient and reliable data upon which to base an adjustment for COVID-19 costs,” Commissioner Lara stated in his order.
Instead, he directed workers’ compensation insurance companies to clearly identify any COVID-19 adjustments in rate filings subsequently submitted to the Department of Insurance, and directed the WCIRB to collect data on aggregate premium charged for the COVID-19 adjustment on an ongoing basis.
“With the pandemic continuing to create uncertainty for the near future, we need to continue to review the data along with the impact of both vaccine distribution and additional and necessary public health measures to bend the curve,” said Commissioner Lara. “Now is not the time to put an extra burden on front-line employers in health care, agriculture and other industries who are keeping our fragile economy afloat. While insurance companies can set appropriate rates, I urge them to be cautious and driven by the data.”
The indicated average advisory pure premium rate level of $1.45 approved by the Commissioner is about 19.4 percent lower than the industry-filed average pure premium rate of $1.80 as of July 1, 2020.
Commissioner Lara’s decision results in an average advisory pure premium rate that is below the $1.56 average rate recommended by the WCIRB in its filing, which includes an add-on of $.06 for projected COVID-19 claims costs. The WCIRB’s recommended average pure premium rate would have been $1.50 without the projected COVID-19 claims costs, which compares to the Commissioner’s just-approved rate of $1.45. Commissioner Lara issued the advisory rate after a public hearing on October 5, 2020 and careful review of the testimony and evidence submitted by stakeholders. The pure premium rate is only advisory, as the Legislature has not given the Commissioner rate authority over workers’ compensation rates.
The WCIRB’s pure premium rate filing demonstrates continued decreases in costs in California’s workers’ compensation insurance market. The pure premium advisory rate reduction is based on insurance companies’ cost data through March 31, 2020, excluding COVID-19. Insurance companies’ net costs in the workers' compensation system have continued to decline as a result of recent legislative reforms such as SB 863, SB 1160, AB 1244, and AB 1124 passed by the Legislature and signed by the Governor.
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The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $340 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.