Insurance Commissioner Dave Jones last fall called for California workers' comp insurers to cut their 2012 pure premium rates by 3% to an average of $2.30 per $100 of payroll. But reports from the field and the rate filings by the carriers themselves indicated that this would not be the case and yesterday afternoon the California Department of Insurance (CDI) confirmed it.
The Department says that instead of a 3% decrease, the average pure premium rate in California is actually up 2.8% from last year. That equates to an average rate of nearly $2.44 per $100 of payroll, according to CDI spokesman Byron Tucker.
The final rate that employers pay can be vastly different from the average filed rate due to their industry classification and past claims history. Additionally the final premium can be influenced through the application of credits by underwriters to lower the final premium on good accounts. But brokers indicated to Workers' Comp Executive that during the recent renewal cycle underwriters were generally being stingier with credits and were digging harder into the employers' claims experience.
The Department says that among the top 100 companies making up 96.7% of the workers' comp market "a majority of companies are using the Commissioner's approved advisory pure premium rates in their filings to be effective in 2012." CDI officials would not provide additional information on the actual number of companies or the percentage of the market that is taking an actual rate cut. But what can be gleaned from this limited information is that where there were increases there were significant ones being taken to turn the majority's 3% decrease on its head.
What's also still missing from the discussion is any crossover to the prior pure premium rate benchmarking methodology. This advisory rate-making process was the first to benchmark the advisory rate against the average filed rate instead of announcing a percentage increase or decrease from the prior approved rate. Commissioner Jones' original approval of an average rate of $2.30 equated to a 37% increase under the prior system.
-30-
(Filed by Brad Cain in San Francisco)