"It's going to be in the ball park of 30%," chief actuary Dave Bellusci tells Workers' Comp Executive. "But I wouldn't be surprised if it's over." Workers Compensation Insurance Rating Bureau (WCIRB) staff still has to finalize the calculations before preparing a pure premium advisory rate recommendation for the Governing Committee, it says, so the final numbers could still change a bit. But a 30 point increase is the general consensus of its Actuarial Committee. This comes against a backdrop where the WCIRB’s veracity and integrity are continuing to come under question.

“A 30 point increase is beyond all reason” says Dale Debber, principal of  Compline and publisher of this newsletter, and recognized workers’ comp expert.  “It will drastically affect California business deterring increased employment during these tough economic times. If taken, it will likely lower the collectable payroll, sales, and incomes taxes for the State California. Worse, this comes at a time when it will necessarily impact the legislature’s budget negotiations.” Debber says, “It will raise the prices of practically everything for all consumers.” The industry is trashing the Schwarzenegger reforms

Debber opines that WCIRB management has a history of putting accurate facts together in such a way as to lead others to an inaccurate conclusion. Compline, he says will soon publish a report studying these issues.

WCIRB says the current calculation does not include a separate element for the impact of the Almaraz/Guzman and Ogilvie decisions, as it is assumed that the impact of those cases is already in the underlying data. The WCIRB is sticking to its previous story and continues to peg that impact at 5.8%.

For its part, WCIRB says the industry's experience is developing consistent with WCIRB’s prior recommendation, Bellusci notes, but says an increase over the prior filing is warranted due to another year of inflation and a lower than projected frequency decline in 2009. The latter point prompted the committee to alter its loss development methodology to base it on the 2009 trend data rather than a two-year average. The committee also tweaked the loss development methodology to account for an industry-wide slowdown in claims settlement rates, but is sticking with its current methodology for calculating loss adjustment expenses.

Overall, the projected loss to pure premium ratio comes in at 1.074, including 0.333 for indemnity and 0.741 for medical. Without the change from the two-year average, the ratios would have been 0.317 and 0.705 respectively.

The committee also looked at loss adjustment expenses for the industry and is sticking with its practice of tempering the impact of the State Compensation Insurance Fund's experience when determining the loss adjustment expense ratios. It settled on a rate of 9.7% for unallocated loss adjustment expenses (ULAE) and 12.4% for allocated loss adjustment expenses (ALAE).

The LAE calculations temper the impact of the State Compensation Insurance Fund's experience due to its extremely high expense ratios. Current data indicate that the state's largest carrier now has an incurred ULAE expense ratio of 51.4% when balanced against incurred losses -- a legacy of its rigid cost structure and the high number of open claims from the days when it controlled over half the market. Its market share is now under 20% and falling, according to the latest data.

For national carriers the ULAE ratio is 8.7% while at private carriers that do most of their business in California the ratio is 10.5%. ALAE expense ratios show less variation with State Fund coming in at 9.8% and nationals at 14.3%. California-focused private carriers were at 10.6%.

The Governing Committee will consider the Actuarial Committee's recommendations at its meeting next week.

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