Flash Report: Industry Blocks Workers’ Comp Rate Cut

A year after asking unsuccessfully for a 6.9% rate increase, the Workers’ Compensation Insurance Rating Bureau will head back to the Department this year with a request for a 0.3% increase over the current pure premium rates. The independent actuary for employers and organized labor, however, estimates that rates decrease by 7.3%.

If Commissioner Ricardo Lara, as he has in the past, chooses the middle ground employers would receive a 3.2% rate decrease overall. Individual classes can go up or down as much as 25%.

The insurer majority on the WCIRB Governing Committee joined together to reject a motion to use the public members’ actuary’s methodology for a rate cut. The insurers then backed a motion to accept the WCIRB’s recommendation for a 0.3% increase.

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

Insurance Commissioner Ricardo Lara last year rejected the Bureau’s filing and ordered it to hold the average pure premium rates steady. WCIRB officials say that over the past year the industry’s experience has continued to moderate and this is driving its rate recommendation. “We can’t link to one key driver – there are several and they all seem to be pointing in the downward direction,” says WCIRB actuary Sean Cooper.

The difference in the industry’s recommendation for a rate increase and Bickmore actuary Mark Priven is based on long-standing methodological differences. The WCIRB bases its filing on the paid loss experience, while Priven weights paid and incurred loss experience equally. Priven is also projecting a lower frequency trend than the WCIRB, and that adds to the difference in projections and recommendations.

Employer representative Diana Rich pointed out to the insurer members that Priven’s forecasts have consistently been more accurate than the Bureau’s, but the reminder did not sway any votes. A filing will now go to Commissioner Lara who will hold a hearing on the proposal later this spring.