Author, Jeremy Hoolihan, Account Executive, Rancho Mesa Insurance Services, Inc.
California Insurance Commissioner Ricardo Lara released a statement that he is rejecting the Workers’ Compensation Insurance Rating Bureau’s (WCIRB) recommended 7.6% increase in the workers’ compensation pure premium rates as well as the add-on to cover COVID-19 claim costs. The Commissioner also rejected a more modest 2.8% increase recommended by the Department of Insurance’s actuaries and the 1.4% decrease recommended by an independent actuary for the public members of the Bureau’s governing committee.
Commissioner Lara’s decision was based on California’s still recovering economy. With businesses trying to recover to pre-pandemic levels and the uncertainty still of COVID-19 disruptions, the Commissioner decided to keep the benchmark rate of $1.45 per $100 of payroll. Keep in mind that the pure premium rate is only advisory as the Commissioner does not have rate setting authority over workers’ compensation rates. In fact, the rate level of $1.45 is actually 18% lower than the industry filed average pure premium rate of $1.77 as of January 1, 2022.
“We’re working hard to get California back to business as usual as people return to work,” said Lara. “This year’s rate is on par with normal, pre-pandemic levels while still reflecting the long-term benefits of workers’ compensation reform passed by the State Legislature and signed by the Governor to reduce costs.”
With signs of a hardening market such as increased carrier combined ratios, increased cost on indemnity claims, medical inflation, and future costs of COVID-19 claims, it will be interesting to see how carriers will respond to this decision. Now, more than ever, it is critical to work with your broker and carrier to improve your risk management program so that your business is positioned well for the future.
If you are interested in how this process works and how it can improve your bottom line, please reach out to me at (619) 937-0174 or jhoolihan@ranchomesa.com. In the meantime, Rancho Mesa will keep close tabs on what the future holds and communicate updates regularly.