Should workers’ compensation insurance companies reduce their rates by 10%? Yes, according to the Workers’ Compensation Insurance Rating Bureau (WCIRB).
The WCIRB advises workers’ compensation insurance companies about cost trends and based upon their analysis of costs, in the California workers’ compensation system, recommends what rates insurance companies should charge.
The WCIRB proposed that this reduction in rates be made on July 1, 2015.
A member of the WCIRB committee that addresses these issues provided a dissenting opinion. That person, Jan Frank, CEO of Pacific Compensation Insurance Company, felt it is premature to know if recent reforms are going to lower costs in the workers’ compensation system to warrant a reduction at this time. “In 2014, certain costs in the system were up, so why may a change at this early time?
Joe Stevens, President of Bridge Safety Consultants, Inc., in Southern California, recently posted his thoughts about the WCIRB’s recommendation in the California Workers’ Comp Forum. Here are some of his comments: “Was reality locked out of the room when they made this decision? Claim frequency has not decreased statewide, and it has increased in the Los Angeles basin. Meanwhile, litigated claims, especially post termination claims, have increased dramatically. So how can they seriously entertain a rate decrease of this magnitude? The WCIRB has done a disservice to brokers, carriers, and providers. I expect few carriers to follow this recommendation.”
According to the authoritative publication, The Workers’ Comp Executive, several insurance companies have already filed their justification for rate increases to the Department of Insurance, to be affective in July and September.
The WCIRB recommendation came as a surprise and some posed a few questions: like these:
- “Is this a political move for the 2016 elections?” (The WCIRB is be a non-political organization)
- “Since the WCIRB may have been off the mark at times, is this a move to show a more proactive move on the bureau’s part?”
- “Is this move an example of a more dynamic organization that will be taking a more aggressive position from their analysis of the data they have collected?”
- “Do you really think insurance companies who are not reaching their financial goals are going to cut rates to make it up in volume?”
Employers may be optimistic, but not “spend” the “savings.” As always, the competitive market place in California will determine how a recommendation like this can help, or mislead, a decision in the select an insurance company.
The criteria list of how to select an insurance company is much longer than one item – “what rate are they charging.” The list is comprehensive for those employers who wish to control their total direct and indirects to enhance their long term financial success.
So, stay tuned for more information as we all see how this story evolves.
Reach out to me with your questions and comments.
*This comment is credited to David DePaolo in his recent blog. Here’s how to view his comments