Calif. Commissioner Approves 7.2 Percent Rate Increase on Pure Premium Rates

California Insurance Commissioner John Garamendi issued a decision June 6 on the Workers’ Compensation Insurance Rating Bureau’s (WCIRB) July 1, 2003 pure premium rate filing that was submitted on April 2, 2003.

The Insurance Commissioner approved a 7.2 percent increase in pure premium rates applicable to new and renewal policies with anniversary rating dates on or after July 1, 2003. The WCIRB’s filing proposed a 10.6 percent increase. As in the decision on the January 1, 2003 pure premium rate filing, the Commissioner predicated the approved pure premium rates on a loss development methodology that relied upon a five-year trend period rather than the three-year trend period relied upon by the WCIRB. This change reduces the indication by 1.6 percent. In addition, the Commissioner rejected the WCIRB’s application of an AB 749 utilization factor on medical costs, which further reduced the indication by 1.5 percent.

The Commissioner also approved a change in the experience rating eligibility threshold, effective July 1, 2003, consistent with the approved pure premium rate change. The threshold has been increased from $33,200 to $35,590. Proposed changes to the Uniform Statistical Reporting Plan and the Experience Rating Plan related to potential insurer premium charges with respect to the Federal Terrorism Risk Insurance Act of 2002 were also approved.

The WCIRB requested that the California Department of Insurance (CDI) allow expedited filing procedures for any insurer rate filing based on the approved pure premium rate changes. The CDI’s Decision notes that amended rating plans filed by insurers that contain only a change in multiplier to reflect the newly-approved pure premium rates shall be effective upon filing with the commissioner. The CDI has also advised that the CDI’s Rate Filing Unit will not require any supplemental actuarial support where an insurer’s filing is only a change in the multiplier to reflect the approved pure premium rate increase.

Click here to view the Insurance Commissioner’s decision (unsigned) and the approved pure premium rates applicable to new and renewal with anniversary rating dates on or after July 1, 2003.