Calif. WC Premium Rate Hike Okayed
By Caroline McDonald
NU Online News Service, May 23, 11:55 a.m. EST?The California Department of Insurance has approved a recommendation by the Workers' Compensation Rating Bureau to raise workers' comp premium rates by 10.1 percent, effective July 1.
The changes, first proposed in a March 28 letter to the commissioner, are for pure premium rates, which reflect only loss costs. They do not include provisions for general expenses, commissions, other acquisition expenses, premium taxes or profits, the Insurance Department said.
"Given the current difficult environment in the California workers' compensation insurance market, it is preferable to err on the side of caution," a department summary of the decision said.
"It is important to lessen the risk that underestimation of loss costs will occur, thereby tending to undermine the financial stability of the market further," the decision noted.
Nicole Mahrt, a spokeswoman for the American Insurance Association in Sacramento, said the department's action "is a good example of why you cannot regulate the solvency of workers' comp carriers solely based on rates.
"Even if they had taken the bureau's recommendations last year and built a 10.1 percent increase into their premiums, this mid-year adjustment just documents that those rates would have been incorrect."
She continued that when looking at the solvency of carriers, "You need to look at more than what rates or premiums are charged. You also have to look at the loss development of a company and how that company is reserved."
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