Workers’ compensation costs continue to decline but employers not seeing equivalent premium savings
News: 2018 Press Release
SACRAMENTO, Calif. — Insurance Commissioner Dave Jones adopted and issued today a revised workers' compensation insurance advisory pure premium rate, lowering the benchmark to $1.74 per $100 of payroll for workers' compensation insurance, effective July 1, 2018. Commissioner Jones has reduced the benchmark rate by 36.5 percent since January 2015, when the average pure premium rate was $2.74 per $100 of payroll.
With an average filed pure premium rate of $2.22 per $100 of payroll as of January 1, 2018, insurers are on average applying pure premium rates that are 27.6 percent more than the indicated pure premium rate approved by the Commissioner today. Even after considering the industry's extensive use of rating plan credits, industry profitability appears to be substantial as a percentage of premium.
"It is time insurers do the right thing and pass along more cost savings to California employers who deserve to share in the benefits cost reductions have brought to the workers' compensation system," said Insurance Commissioner Dave Jones. "In addition to the cost reductions that have led to higher profits, insurers are also benefiting from the federal income tax break, which should result on average in about another five percent decrease in premiums."
Commissioner Jones' order sets the advisory pure premium rate below the $1.80 average rate recommended by the Workers' Compensation Insurance Rating Bureau (WCIRB) in its filing. Jones issued the advisory rate after a public hearing and careful review of the testimony and evidence submitted by stakeholders. The pure premium benchmark rate is only advisory, as the Legislature has not given the insurance commissioner authority over workers' compensation insurers' rates.
The WCIRB's pure premium advisory rate filing established that overall costs continue to decline in California's workers' compensation insurance system. The pure premium advisory rate reduction is based on insurers' cost data through December 31,2017. Insurers' net costs in the workers' compensation system continue to decline as a result of SB 863, SB 1160, and AB 1244 enacted by the
Legislature and Governor Brown. The WCIRB noted continued favorable medical loss development including acceleration in claim settlements.
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The commissioner has the authority to regulate auto, home, and property insurance rates and has saved consumers and businesses $3.1 billion in rates by rejecting excessive rates or rate increases for those lines of insurance, but the Legislature has not given the commissioner the authority to regulate workers' compensation rates. Workers' compensation insurance rates are not set by the Department of Insurance. Under California law, workers' compensation insurers set their own rates.
The purpose of the pure premium benchmark rate process is to review costs in the workers' compensation insurance system and to confirm that rates filed by insurance companies are adequate to cover benefits for injured workers and to provide information to employers, workers and the public about the cost trends in the system.
Workers' comp pure premium proposed decision.
Workers' comp pure premium decision and order.
Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at www.insurance.ca.gov via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.