The Governing Committee of the Workers' Compensation Insurance Rating Bureau is recommending that the pure premium rate be decreased 16.4 percent for policies renewing or incepting July 1. This is the third double digit rate decrease in a year and amounts to a cumulative 55 percent decrease in the pure premium or in loss costs.

Bureau actuaries also predict that loss ratios will probably stay in the 37 percent range and perhaps even dip a few points lower.

The decrease reflects both the drop in frequency and continued declines in indemnity and medical costs thanks to the California workers' comp reforms. The Bureau predicts that rates will probably flatten out. But the permanent disability wars in the legislature are just beginning and challenges to utilization review may also emerge to dampen the future outlook.

The biggest factor is the continuing decline in frequency which is down 17.7 percent in 2004-2005. Frequency declined 17.1 percent in 2003-2004 and 6.6 percent in 2002-2003. Bureau actuaries say the biggest decrease in frequency is in the permanent partial disability claims and conclude that because of the reforms there are fewer incentives to move claims into the workers' comp system.

The data from the accident year 2004-2005 is emerging favorably as both medical and indemnity costs continue to show sharp declines. The new Permanent Disability Rating Schedule continues to generate lower costs, and Bureau actuaries say that not only is there less being paid, but PD benefits are being paid more quickly.

But how long can the savings continue? Earlier today, Sen. Richard Alarcon (D-Van Nuys) held a public hearing on the impact of the PDRS, and legislation only in spot form could emerge to change the PDRS methodology. Depending on what happens in the second half of this legislative session, any adjustments the Bureau has to make to its assumptions could create greater uncertainty and send rates in the opposite direction.

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