20 May Rating Bureau to Recommend 0.3% Rate Hike

IN A SIGN of the long-lasting effects of reforms enacted a decade ago, California’s workers’ compensation rate-making agency will recommend that average benchmark rates increase a mere 0.3%.

The recommendation by the Workers’ Compensation Insurance Rating Bureau, would apply to policies incepting on or after Sept. 1, 2023. After the Rating Bureau’s governing committee approved the recommendation, it now heads to the insurance commissioner, who will hold a hearing and then decide whether to approve the recommendation or order a different increase or decrease in the benchmark rate.

The benchmark rate, also known as the pure premium rate, is a baseline that covers just the cost of claims and claims adjusting, but not other overhead and profits. Insurers use the rate as a guidepost to set their own prices.

Individual premiums employers pay will depend on the pure premium rate, the carrier’s own pricing methodology, and the employer’s claims and claims cost history, location and industry.

Benchmark rate may actually decrease

If his recent history is any guide, Insurance CommissioneR Ricardo Lara is likely to order a pure premium rate decrease. Last year, after the Rating Bureau recommended a 6.9% hike, Lara ordered that rates stay the same.

The Workers’ Comp Executive trade publication predicts that he will reduce rates about 3%, but notes that “Individual classes can go up or down as much as 25%.”

Rate Hike Drivers

Drivers of the rate recommendation include:

• Lower claims cost inflation
• Lower frequency of claims
• Lower overall claims costs
• Stable medical costs
• Fewer COVID-19 claims
• Lower claims adjusting costs

One other reason rates continue to decline is that workplaces are generally safer than ever. The number of workers’ compensation claims hit a low of 13 per 1,000 workers in 2022, down from 49 in 1991.

The only year that was lower than 2022 was 2020, due to the strict measures that shut workplaces across the country when the COVID-19 pandemic first hit.

More good news: COVID-19 workers’ comp claims have slowed dramatically, accounting for just 2.2% of claims between

March 2022 and February 2023. That’s compared with 6.2% of claims in 2022, 5.2% in 2021 and 15.3% in 2020 (see below)

Decision expected this summer

Commissioner Lara will hold a public hearing on the recommendation in the coming months, after which he will issue a decision to approve the filing or set another rate. We’ll keep you posted at the time.

If you have questions about your workers’ compensation coverage, please call us anytime.