Insurance Providers

Western States News

October 25, 2008

California Insurance Commissioner Steve Poizner accepted a more moderate 5 percent increase in workman’s compensation while rejecting the Workers Compensation Insurance Rating Bureau’s (WCIRB) request for an increase of sixteen percent as a benchmark for determining workers' compensation costs. The request for the increase reflects the demands of higher medical costs and the impact of claims adjustment costs to the system.

Poizner says that last year exports were predicting that loss adjustment expenses would dramatically. However, according to him, they did not. This year, he says, experts are predicting accelerating increases in medical costs. In his opinion, bearing in mind the accuracy of past forecasts, he says that he will be waiting for data that are clear and compelling that confirm such increases before significantly increasing the Workers' Compensation Claims Cost Benchmark.

The pure premium advisory rate has been given the new name of workers' compensation claims cost benchmark in order to more accurately define the estimated change in claim costs that are developing in the workers' compensation system. In the future it is this term that will be employed in the future as it serves to more accurately describe its role in the workers comp pricing system.

The Commissioner is advising workers insurance compensation companies to be careful if they are trying to adjust rates even though the Department has no authority to set workers' compensation rates.

Commissioner Poizner is saying that in spite of this adjustment to the Claims Cost Benchmark, it remains clear that insurance companies are still profitable in California and that there still remains room for them to reduce the premiums they charge. He says that the insurers need to work with their employer customers in order to control the cost of workers' compensation insurance and to help California businesses to stay financially healthy and competitive. He says that in spite of the fact that he has no control over workers' compensation insurance rates, he nevertheless is encouraging employers to work with their insurance agents and their brokers to shop for the best prices.

Nicole Mahrt, director of public affairs, western region, for the American Insurance Association, believes that the Commissioner's decision is reasonable. Mahrt says that in his opinion he has balanced the needs of both employers and insurers. Mahrt explains that each insurer will now need to take this recommendation and apply it to their book of business to determine their January rates. He says that the good news is that California continues to have a competitive workers' compensation marketplace. He sees the system as remaining stable and predictable even as costs are increasing. He stresses the importance of continuing to protect the reforms that have stabilized California's once chaotic system.