Calif. Commissioner Approves 10 Percent Workers’ Comp Rate Increase

On Oct. 20, Insurance Commissioner Harry Low took his first step to improve the dire state of California’s workers’ comp market. Low approved the Workers’ Compensation Insurance Rating Bureau of California’s (WCIRB) proposed 10.1 percent average increase in pure premium rates effective Jan. 1, 2001.

“The increase is due in large part to worsening severity in medical costs,” Low said. “…Everyone should understand that the pure premium rates that I approve are advisory only and that they are, by law, only loss costs and loss adjustment expenses…I believe that open rating will work in the long run only if insurers act responsibly and charge rates that reflect their actual costs.”

California has been following a system of open rating since 1995. Over the last several years, significant downward deviation from the pure premium rate has contributed to problems in California’s workers’ comp environment. While the Insurance Commissioner does not have the authority to set rates for workers’ comp, the system allows him to provide guidelines to the industry.

WCIRB President Robert G. Mike commended the Commissioner for recognizing the need for the increase. “While we recognize the average market price remains below the loss cost (pure premium rate) level, we believe that adequate pure premium rates are an important step in restoring the health of the California Workers’ Compensation insurance industry,” Mike said.