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| | Dave Jones Issues Mid-Year Advisory Pure Premium Rate Reduction Of 5 Percent For Workers’ Compensation Insurance In California By Lonce LaMon - May 8, 2015
Dave Jones, the California Insurance Commissioner, adopted and issued a revised advisory pure premium rate yesterday, lowering the advisory pure premium rate benchmark to $2.46 per $100 of payroll for workers' compensation insurance, effective July 1, 2015.
Jones adopted the recommendation of the Workers' Compensation Insurance Rating Bureau (WCIRB), which filed a recommendation to lower the advisory pure premium rate mid-year. Mid-year pure premium rate adjustments are not the norm. New data reflecting a significant change in underlying workers' compensation costs is required before the commissioner will issue a mid-year adjustment.
The purpose of the pure premium benchmark rate process is to review costs in the workers' compensation insurance system and to confirm that rates filed by insurance companies are adequate to cover benefits for injured workers. The commissioner's pure premium decision is advisory only, as under California law the commissioner does not set or have authority to reject workers' compensation insurance rates. The commissioner's advisory pure premium rate is not predictive of what an individual insurance company may charge its policyholders because the review of pure premium rates is just one component of insurance pricing.
Jones issued the mid-year advisory pure premium rate one week after a public hearing and careful review of the testimony and evidence submitted. The commissioner reduced the advisory pure premium rate mid-year, based on insurers' cost data indicating that in 2014 there was a reduction in workers' compensation insurers' medical costs. The reductions in medical costs appear to be the result of SB 863 (De León), signed in 2012. The WCIRB noted that not all of the cost reductions projected from SB 863 have materialized. Other costs continue to rise, but those increases were offset by the reduction in medical costs.
Under California law, workers' compensation insurers set their own rates. The WCIRB will evaluate workers' compensation insurance costs again in the fall of this year when it files its 2016 pure premium rate benchmark recommendation with the Department of Insurance. That filing will provide an opportunity to assess whether medical costs continue to be lower and what changes, if any, there are in other costs in the system.
lonce@adjustercom.com; journalist Lonce LaMon, all rights reserved; information extracted from Press Release issued by the California Department of Insurance dated May 8th 2015.
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