Flash Report: Has the Bureau Lost Its Ever Lovin’ Mind?

The Workers’ Compensation Insurance Rating Bureau’s Governing Committee reviewed the latest claims experience and the actuarial analysis of the data, and its insurer member majority approved a rate filing for a 6.9% increase in the base advisory pure premium rates before a  Covid-19 surcharge. The total increase sought will be a 7.4% hike after adding a 0.5% factor for Covid-19 costs.

The Bureau’s decision comes against the backdrop of a profitable workers’ comp industry and employers still trying to recover from the lockdowns. Moreover, during an election year, it gives politicians another reason to run against “evil” insurance companies.

The Bureau is a private organization with quasi-governmental responsibility. It is financially supported exclusively by insurance carriers in whose interests it operates.

Insurer Majority

The decision sets up another showdown with the actuary representing employers and organized labor, recommending a 2.1% decrease.

The insurer majority voted in unison to reject a filing using the recommendation for a decrease by Mark Priven of Bickmore. Public members also opposed the Covid-19 load.

Once again, the main driver of the difference in recommendations is how each side projects the impact of claim frequency on the rate projection. The Bureau recommended a 2.7% increase in the last filing, while Priven recommended an 8.2% decrease. The increase sought in this year’s filing is essentially the same increase the industry sought last year that was rejected by the Commissioner.

Last year, Insurance Commissioner Ricardo Lara and the actuaries at the California Department of Insurance opted to essentially average the frequency projections and split the difference at a 3.4% decrease.

The September 1, 2022, rate filing will also include an adjustment for Covid-19 costs in the system. The Bureau’s actuarial team recommended adding 0.5% to the rate or about seven-tenths of a penny to the rate, and the proposal is to add the cost onto each rate equally.