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This week, the WCIRB submitted its January 1, 2012 Pure Premium Rate Filing to the California Department of Insurance (CDI) containing pure premium rates proposed to be effective January 1, 2012. These pure premium rates represent the anticipated cost of losses and loss adjustment expenses expected to be incurred on policies incepting on or after January 1, 2012.
This week’s filing is a departure from WCIRB’s methodology as part of their effort to make the rate filing process more transparent and provide more meaningful information to the public, explained Bob Mike, President of WCIRB.
In this filing, the proposed pure premium rates are benchmarked to the average pure premium rates filed by insurers. In prior filings, the WCIRB proposed rates that were benchmarked to the approved pure premium rates.
WCIRB is hoping that agents and brokers and their customers will see that underlying costs are increasing and have been for the past five years even though rates charged by insurers have not always reflected those increases. For a variety of reasons insurers rates have been less than those recommended by the WCIRB. As a result explained Mike, there has been a confusion in the marketplace.
“This has led to a misunderstanding among the public that a change in the approved pure premium rates will have a direct and commensurate impact on the rates filed and charged by insurers,” said WCIRB in their press statement.
The average of the 494 classification pure premium rates proposed in the most recent filing is $2.33 per $100 of payroll. This average proposed pure premium rate is 1.8% less than the corresponding average of insurer filed pure premium rates of $2.37 as of July 1, 2011. In this filing the proposed pure premium rates are very close to the actual rates filed by insurers.
The CDI will hold a public hearing regarding the WCIRB's filing on September 27, 2011 at 10:00 AM in the 22nd Floor Hearing Room, 45 Fremont Street, San Francisco, California. These documents, and all other documents related to the WCIRB's filing, are now available on the Regulatory Filings page of the WCIRB website.
The changes in the filings were instituted in response to requests from the Insurance Commissioner’s office under the Poizner administration and continued by the current administration.
“Rate filings are very complex,” said Mike. “But we want employers to be aware that underlying costs are rising and they should continuing working with their agent/broker to control losses and their experience modification ratings.
Also this week, the California Supreme Court refused to hear an appeal filed by the State Fund in the Workers Compensation Appeal Board (WCAB) v. Almaraz. The case, State Compensation Insurance Fund vs. WCAB (Almaraz), which California’s Workers’ Compensation Appeals Board combined with another similar dispute involving the Milpitas Unified School District and claimant Joyce Guzman.
The WCAB rulings in 2009 in the Almaraz/Guzman cases in 2009 opened the door to rebuttals by physicians in setting disability ratings and undermined a major component of the workers compensation reforms passed in 2004.
When asked what effect this would have on their recent filing, WCRIB’s President Bob Mike said they had already considered the Almaraz/Guzman decisions in the rates.
“These decisions were made several years ago and we have seen costs steadily increasing because of them so we have already included this in our rate filings,” said Mike.
“It’s pretty unequivocal that costs will continue to go up in California,” Jerry Azevedo, of the Workers’ Compensation Action Network (WCAN) told Insurance Journal magazine. “We have to look to other ways to restore the predictability that the legislators [who enacted the 2004 reforms] were looking for,” he added.