AIA Says Recommended Calif. Workers’ Comp Pure Premium Rate is Overly Optimistic

The American Insurance Association (AIA) issued the following statement recently by Mark Sektnan, assistant vice president western region, AIA, in response to the approval of a 14.9 percent reduction in the recommended pure premium rate by the California Department of Insurance (CDI).

“This recommendation raises serious concerns. CDI has approved a rate reduction of 14.9 percent, which is significantly more than the Workers’ Compensation Insurance Rating Bureau’s recommendation of a 2.9 to 5.3 percent reduction. CDI is anticipating the most optimistic potential cost savings from the legislative reforms adopted in 2003. However, many of the cost savings that the CDI is basing their recommendation upon are utilization review tools that were developed using the group health model but are untested in the workers’ compensation system.

“Previously, the CDI has appropriately acknowledged the need to foster a competitive insurance market that would attract more capacity. It is questionable that this recommendation, based on overly optimistic projected savings, will entice more carriers into California’s marketplace. All along we have said more needs to be done and that the Legislature needs to approve more reforms to reduce sky rocketing costs.”