Annual benchmark rate for California's workers' comp set to decrease

Annual benchmark rate for California’s workers’ comp set to decrease | Insurance Business America

Workers Comp

Annual benchmark rate for California’s workers’ comp set to decrease

Insurance commissioner’s new order overturns a rate increase request from the state’s bureau

Workers Comp

By
Kenneth Araullo

California’s annual benchmark rate for workers’ compensation is set to decrease by 2.1% following an order by Insurance Commissioner Ricardo Lara.

This decision overturns a 0.9% rate increase request from the Workers’ Compensation Insurance Rating Bureau of California (WCIRB), according to a report by AM Best.

The new order reduces the average advisory pure premium rate from $1.41 per $100 of payroll in 2023 to $1.38, effective Sept. 1. The WCIRB’s recommended increase would have set the pure premium rate at $1.42 per $100 of payroll.

Several factors contributed to the decision to lower the benchmark, with a decrease in the number of medical services needed per claim and a reduction in the percentage of claims involving permanent disability named significant reasons, according to a release from the commissioner’s office.

Other considerations included the robust condition of California’s workers’ compensation sector, overall economic conditions, and projections from insurance department actuaries.

A similar adjustment was recently made in Massachusetts, where Acting Insurance Commissioner Kevin Beagan ordered a 14.6% reduction in statewide workers’ comp rates, compared to an 8.3% decrease recommended by the state’s workers’ comp rate advisory board.

The California order also emphasizes that the commissioner’s action serves as a recommendation, and insurers will ultimately determine their own rates. Individual premiums can vary significantly based on a business’s industry risk profile, employee mix, operations, and claim history.

In 2023, the actual average workers’ comp rate was $1.60 per $100 in payroll, down from $1.68 in 2022 and $1.81 in 2021, according to the commissioner’s order. This actual average charged rate was 9.6% higher than the advised pure premium rate of $1.46 and approximately 36% lower than the industry average filed manual rate of $2.52 as of January 1, 2024.

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