Your Work Comp wonk is writing to advise you about new rates for State Compensation Insurance Fund policyholders effective 01/01/2009. Their premiums are increasing on average 8.9%
This will mean that some of you will pay more than that, some of you less.
There’s been a difference of opinion between three organizations which have various responsibilities as it relates to setting Workers Compensation premium rates here in California.
The WCIRB, (Workers Compensation Insurance Rating bureau), has recommended a 16.0% increase in premium rates, this is their recommendation to all Workers Compensation insurance companies here in California. They base their recommendations on the Claims payment data they are seeing from the insurance companies.
The Insurance Commissioner looked at the data and indicated that he felt premiums should only go up 5%.
Read his press release. The LA times writes about it in this article.
Well, the largest carrier in California, the State Compensation Insurance Fund, weighs in with their premium increase, read their premium increase news flash.
The way you may interpret this is that the WCIRB takes the most calculating look at the data, and comes out with what they believe to be the accurate reflection of where premiums need to go. The Insurance Commissioner is a politician, and one who is going to run for governor. Therefore, he would like to stay the friend of business, to the greatest extent possible, and publicize that things are not that bad, so he recommends a lower premium increase. And ultimately, the State Compensation Insurance Fund looks at everything and doesn’t want to lose policyholders because of higher rates. So they come in about mid-way.
If you are a Workers Compensation policyholder in California, you can expect higher premiums on your next renewal. This is big news, because premiums had been coming down from 2003 to 2007. Now, that trend may start heading the other way. But there are usually things you can do, with the help of your competent broker, to improve your bottom-line. If you lack an experienced broker, I gently suggest it may be time to contact one for a policy review. Perhaps even me. This is especially true for Experience-modified policyholders. You have greater opportunities, and potential pitfalls, than those who are not experience-rated.
Wishing there was better news.
Another California Newspaper is writing about Uninsured Employers and the fines and sanctions they face.
The Ventura County Star, in this Workers Compensation article is mentioning that the local District Attorney is sending investigators out to businesses. The DA’s staff simply shows up at any business and asks to see written proof of their Workers Compensation coverage.
If you have coverage, but don’t have immediate proof of it, they give you ten days to get the proof.
If the business lacks coverage, the owners face fines starting at $10,000. They also face Criminal Misdemeanor charges. This is detailed in Labor code section 3700.5
The article doesn’t mention that in addition to the fines, the business would likely be shut down until they can provide proof to the appropriate agencies and authorities that they have indeed obtained coverage.
How much lost business could that mean? How many days with doors closed?
Businesses should obviously have coverage to comply with known laws. And District Attorneys in various jurisdictions are beginning to enforce the laws that have been on their books for many years.
They’ve also been hearing from businesses which are covered, about the competitive disadvantage they face as they compete against un-insured businesses.
Some industries habitually claim that their staffpersons are all independent contractors, such as: Real Estate and Lending salespersons. Enough on that for now, just make certain that you have coverage, have proof of it, or that you get it, ASAP. It would be a good idea to do so before the premiums go up on January 1, 2009.
Cheers to the insured, Jeers to the uninsured.
To achieve lower premiums, you, (or your capable broker), must pay attention to several items.
Chief among them are your open claims. Open claims are considered paid claims until they are finally closed,
(by your overworked claims adjuster).
The dollar amount your insurance company has reserved for your claim counts as a loss against your policy, and is reported to the Workers Compensation Insurance Rating Bureau, (WCIRB). It then appears on your Unit Statistical report. This will happen year after year until the claim is closed, but thankfully, it only counts against your experience modification for the first three years.
This is all fairly reasonable, and in fact, the insurance companies are required to treat your open claims as paid claims. However, at least two issues here have substantial impact on your Unit Stat report, which means they have direct effect on your premium.
The issues are:
1) The dollar amount your Claims adjuster has reserved for the claim is larger than necessary, and
2) The Claims adjuster has kept your claim open, even after your employee is back to work!!
The reasons these things happen:
1) When claims initially happen, the claims adjuster has no idea how substantial the injuries to your employee are. So she sets a claims reserve on the high side, BUT NEVER BACKS IT DOWN!! Example: The employee’s cut, which gets ten stitches, is treated as a $50,000. claim. Does this make sense?
2) In many cases, the adjuster doesn’t keep up with the employee, or with you, to know when the employee is back at work. And even worse, in some cases, the claims adjuster has every paperwork item he needs to close the claim, but the information just sits on his desk. Does that make sense?
As they say, “the squeaky wheel gets the grease”. Be the squeaky wheel. How, you say?
Well, either you have to do it, (yea – like you have time for that), or your Broker/Agent does it.
That’s right; this is regular maintenance for your program. And it pays off.
You can positively affect your experience-modification if you do this.
One of the best things I hear from an adjuster is when she says: “Oh, I can close this claim”.
And I say, great, could you do so, TODAY!! Thank you, my client will be delighted.
Best wishes for a lower mod.
This post is another call to those employers who haven’t yet obtained coverage.
As seen here in an article from the Californian, a Salinas based newspaper; the service station employer/owner was placed on probation for three years and is required to pay a $10,000 fine for not carrying coverage.
The article doesn’t mention this, but it’s likely that she was shut down until such time that she could prove that she obtained coverage. How many days could that have taken? Whatever it was, that’s a lot of revenue for a gas station to go without. Note also that she pleads guilty. She had no choice.
If you’re an employer without coverage, contact your local broker, (or myself), and get covered now.
Don’t take the chance that the Department of Industrial relations won’t find you.
Cheers, your work comp wonk.
Workers Compensation Insurance Rating Bureau
Try to think of the number one item which affects your Workers Compensation coverage premium.
Is it the Insurance Company you’re with? No.
Is it your agent/broker? Maybe – if he or she is knowledgeable about the subject being discussed here.
Is it the California Work Comp industry in general? No.
Is it the industry you’re in? No.
Is it the claims history you have? Could be, but if your claims history is difficult, there are still things which can, and should be done to improve your premium.
For experienced-modified policyholders in California, (generally those paying over $12,000 to $15,000 in premium each year), the number one item which affects your modification, and thus your premium, is your Unit Statistical report. What’s that?
This report is produced by your (current or prior) insurance carrier 18 months after your policy first starts. The insurance carrier is reporting to the WCIRB, (Workers Compensation Insurance Rating Bureau), specific information about your claims, (open claims, closed claims, paid claim amounts and amounts in reserve). Every carrier is required to do this, and to do it 18 months after your policy starts. The carriers must report again after the 30th month, and again twelve months after that. Even though a long-standing claim can go on for many years, your experience modification is effected only for the initial three years of claims activity for each claim.
In cases where you have been with a carrier that went insolvent, it can be quite difficult to obtain an accurate report. This is truly a situation where choosing a capable carrier has long-term effects for your business.
In any case, as the business owner or other responsible person in your organization, consider the
Unit Stat report like a final exam. This is the key date for your work comp plan. If your agent/broker is not focused on this date and the claims information shown on this report, then you have the wrong representative.
You might ask, why should I care? Others are nodding their heads, I know, I know.
They know how vital it is to take action before the report is filed,
(once filed, no adjustments are allowed).
The next post: the what, why and when of the Unit Stat report.
And what your broker can do, (for you), to improve the report.
Cheers, your work comp wonk.
Uninsured employers need work comp coverage
I doubt whether many readers of this blog are in the position of being an uninsured employer without Workers Compensation coverage. If you are, an article out of San Luis Obispo highlights the perils of being on either side of this problem. The writer, Colin Rigley, describes how the injured employee slipped and incurred injuries, only to find out that the employer had not obtained coverage after buying the business.
The employer has filed for bankruptcy, and is facing a civil lawsuit from the injured employee. He is also likely to have the Department of Industrial relations chasing him to recoup the payments the Uninsured Employers Benefits Trust Fund made to the employee for her treatments.
Employers, the message is clear; Don’t operate this way.
If you do, the risks to you and the injured person can be more than you can imagine.
Cheers, to those who operate properly
I recently posted about the expected rate increase for workers compensation premiums effective 01/01/09. Now other news and work-comp reform organizations are coming on board to advise their readers and members to become aware of the proposed premium change.
The post by Jan Norman of the OC Register relays the specific breakdown of the premium increase, and she is recalling the horror story of rates prior to the reforms of the Schwarzenegger administration. Those employers in business at least ten years know this story well. And while thankful for the reforms, (mostly SB899 – click for summary), we know there are other forces less concerned about the effect of Workers Comp rates on California businesses.
Orange County employers: take her cue and enlist your broker to perform his/her best review of your experience modification factors and your current discount package to see if improvement can be made before higher rates hit your next renewal.
Another organization is alerting its participants to the changes on the horizon, see: http://www.fixworkerscompnow.org/
This blog is for the purpose of addressing best experience mod management practices, so check back as I peel away the curtain and reveal how your business can position itself to achieve a better bottom line for your workers compensation plan.
Cheers, your work comp wonk.
This post concerns a bizarre and deeply troubling aspect of Identity Fraud. Being a California Homeowners Insurance Agent/Broker I regularly insure homes. One of my clients, (we’ll call him AL – not his real name), in the Los Angeles area called me about some homeowner’s insurance correspondence he received at his home – but not addressed to him.
He assumed it was meant for him because it came from the exact same insurer which handles his homeowner’s coverage – an amazing coincidence, but a coincidence nonetheless. Upon opening it, he discovered a welcome letter. He telephoned me to inquire about why a welcome letter would come, when he had already received one two years ago when we wrote the policy.
It turns out that an individual posing as the “new” owner, (we’ll call him Joe), visited a local agent and paid cash money to start a policy on Al’s home!! But he neglected to have the mail re-routed to a different address.
Al immediately contacted me to inform me about this situation. I was able to see information about the new policy on our computer system because of the (beneficial) coincidence that the Identity thief happened to choose the same insurance carrier as Al. We both spoke to the agent who initiated the new policy for “Joe”. The agent indicated that “Joe” said he got a great deal on the home at auction, and added that the former owner had a tax lien which forced him to sell at auction.
This is clearly a concocted story, (Al has owned the property for forty years, FORTY YEARS!! – and never missed a tax bill). By the way, in this part of LA, the homes now go for close to a million dollars. He long ago paid off his mortgage.
I immediately ran a Title report which indicated that Al officially owned his home. I perform this service for Al because he does not regularly use a computer, (when one reaches eighty years of age one doesn’t feel the need to be on the web so much). There was some comfort in the report, but not much considering all the bizarre events. The LAPD declined to take any nature of police report.
Two weeks later, a letter comes to Al’s home from a large National bank thanking “Joe” for his Home Equity loan application. “Joe” is assured that his loan application will receive the utmost care and proper handling.
Al called me to ask if I would run another title check. I did, and it was there in black & white, “Joe” now owned Al’s home. The Title transfer was listed as a “gift” deed.
This is where things stand at the moment. Identity Theft coverage is included in the policy I wrote and the insurance carrier is responding to the claim. Al has a family attorney who has also become involved. The LAPD still shows no interest in taking a report. The California Dept. of Real Estate is likewise not interested. The Title Insurance Company which processed the transaction says they didn’t process the transaction.
Access these resources provided by the FTC.
As more developments arise, I’ll update the status.
Cheers, your Work Comp wonk.
It happened; it had to – but this is sooner than most would have expected.
The WCIRB, the rating bureau for Workers Compensation in California, announced yesterday that they have filed a 16% pure premium increase to be effective 01/01/2009. Many carriers will consider filing for a rate increase to match this recommendation.
Because our California Workers Compensation marketplace is so vast, (long ago) the CA Dept. of Insurance deemed it necessary to create a rating bureau to gather all appropriate information about the Work Comp system. This includes all the data from carriers about their claims activities and payments. Nationally, other states subscribe to the NCCI. But here in CA, we have our own bureau. They work quite similarly.
This premium filing is big news because it signals that the Titanic is making a sharp u-turn. Businesses will be surprised to see premium increases when all they’ve seen the past few years are decreases.
Since Gov. Schwarzenegger and the legislature hammered out some much needed reforms, the Bureau had been recommending reduced premiums. This is the first time in over four years that an increase has been filed. The effect for Business owners would be like skiing into a tree.
That’s the background. What this means is that business must re-visit the fundamentals of their program. Some never left the fundamentals, and their experience mods reflect that stewardship.
Others relaxed a bit and enjoyed the reduced premiums even as their underlying claims activity deteriorated.
Consider this premium filing the warning shot. Contact your broker and initiate activities to make certain that diligence is paid to ex-mod maintenance and improvement now. The California Workers Compensation coverage system is a huge ship, and once it changes course, it is difficult to alter its path. This new premium filing shows that the course has changed.
Cheers, your work comp wonk.
If you are a company owner, CEO, HR manager, or anyone else involved in renewing your company’s work comp coverage plan, consider this blog one of your resources as you endeavor to do the best you can for your company.
Sometimes, it’s not easy trying to get an appropriate level of service in the work comp coverage arena. To help answer questions, and put you – the buyer or manager of Work comp – in the driver’s seat, this blog exists.
It was created by me, Mike Vrchota, a California insurance agent/broker, and my philosophy is obsessively client-centered. As you consider renewing your work comp plan, if you sense that your current broker or insurance carrier are not putting your interests first, then arm yourself with knowledge about the work comp environment. Resources are available to help you.
I’ll be posting regularly on topics such as:
Class codes – are yours correct?
Multi-State coverage – separate policies, or all together?
Experience Modification – What is it? Can I improve mine?
Can I get away from the State Fund?
How? Why? When? What? (are you kidding!!)
This is the tip of the iceberg.
We have much to discuss as we talk about improving your bottom-line.
And improve we must, because forces of change are gathering.
Comments, rants, questions, and concerns are all highly encouraged. Give me your stories, share victories and inform others about your companies’ experience related to starting or renewing Workers compensation coverage.
Cheers, your work comp wonk.
