Insurance Commissioner Ricardo Lara rejected the insurance industry’s request for an increase in the workers’ comp advisory pure premium rates. Instead, he ordered a 2.1% rate cut. The Workers’ Compensation Insurance Rating Bureau, despite record profits in workers’ comp, filed for a 0.9% increase. Last year’s filing for a 0.3% increase was also rejected.
Could the Bureau consistently file for an increase as a strategy to limit the decrease?
The Bureau, a private entity with quasi-governmental responsibilities, operates in the exclusive financial interest of the insurance carriers that support it.
The Commissioner’s decision did not go quite as far as the 3.5% rate cut that the private members actuary, Mark Priven, said was reasonable given industry trends but did continue a string of flat to declining rates that date back to 2015.
The approved rate is 21% below the $1.75 average pure premium rate that carriers filed with the Department as of January 1, 2024. Priven advises the public members on the WCIRB’s governing committee, which represents employers and organized labor. The public members have a minority position on the committee.
Healthy Market
“The California workers’ compensation market appears to be competitive and financially healthy,” California Department of Insurance actuary Gio Muzzarelli says in the decision adopted by Commissioner Lara. “Collected premiums in 2023 produced an average charged rate of $1.60, which compares to $1.68 and $1.81 observed in 2022 and 2021 respectively, showing a continuation of a downward trend in charged market rates that has been in progress since the first half of 2015.”
Muzzarelli notes that the average charged rate is 9.6% higher than the average advisory pure premium rate approved for September 1, 2023. Advisory pure premium rates reflect loss and loss adjustments expenses only, while insurers charged rates also include premium for all other expenses and profits.
A more complete analysis of the decision will be found in next week’s premium edition of Workers’ Comp Executive.
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