Author, Rory Anderson, Account Executive, Rancho Mesa Insurance Services, Inc.

Pure premium rates are determined by the Workers’ Compensation Insurance Rating Bureau (WCIRB). The rates reflect the amount of losses that an insurance carrier can expect to pay out in claims for a particular class of business. Every year, the WCIRB submits pure premium rates to the California Department of Insurance for approval. These pure premium rates are comprised of loss and payroll data submitted to the WCIRB by all the insurance companies in California.

Each workers’ compensation insurance company has its own base rate for the 0106 Tree Pruning class code, for example. In order to establish the base rate, the insurance carrier takes the approved pure premium rate from the WCIRB and applies their factor that includes general overhead expenses, sales and marketing expenses, taxes and fees, and profit. So, if the pure premium rates are increasing, the insurance companies’ base rates are also increasing.

The 2022 pure premium rate in the tree care industry (class code 0106) has increased to $11.36 per $100 of payroll, which is roughly a 9% increase from last years $10.39. This means that the overall workers’ compensation claim activity in the tree care industry is up about 9%, and the WCIRB is recommending that the workers’ compensation insurance carriers increase their base rates to price for that increase in claim activity.

What can you do to prepare for this change and limit the impact to your tree care business?

• Lower your claim frequency and severity with a consistent, robust safety and training program, focusing in on root causes of the claims.

• Control your experience MOD with quarterly claim reviews and an aggressive return to work program.

• Maintain strong carrier partnerships and continuity with carriers that have excellent in-house claims handling.

• Benchmark your company with the rest of the tree care industry to see how you compare to your peers. As part of our proprietary TreeOne™ program, we have created a Key Performance Indicator (KPI) dashboard for the tree care industry that puts this information at your fingertips. To see how you compare with your peers, request the KPI Dashboard for your company.

For more information on rising pure premium rates, contact me at (619) 486-6437 or email me at randerson@ranchomesa.com.