This was a very informative two-hour seminar put on by Dave Bellusci, Senior VP and Chief Actuary of the Bureau, and one of his Senior Research Analysts.

I already knew the basics about the changes: Employers with Experience Modifications over 100 are likely to receive higher mods, and those under 100 will get lower mods.

But during the seminar I learned the following:

Ø      how the new benchmarks will work,

Ø      how the new Credibility values, (B and W values) will apply,

Ø      That the Expected loss values will reflect results from 20 Industry groups the bureau identified,

Ø      How the Rating forms themselves will undergo some helpful features, (including a loss-free rating number on Rating forms), starting in 2011.

All in all, it was very informative, and there was a lot more information.
If anyone reading this emails a question to me, I’ll be happy to research it to provide the best available answer. Here is a link to the WCIRB spotlight note about the changes: https://wcirbonline.org/wcirb/spotlight/spotlight_2009_11.html

In the meantime, Employers, do your best to “brace for impact”.
Focus on your fundamentals of claims management, injury prevention, and loss-control. These activities will serve you well because in the future it’s likely that your premium will increase.

Thank you,
Mike Vrchota

Without question, the far more important date of the year is six months after your renewal date. If your broker doesn’t know this, or talk about the importance of the Unit Statistical report and the Valuation date, you have the wrong broker.

If you are not experience rated or experience modified now, or ever expect to be, this won’t really apply to you. In California, only those businesses which pay somewhere around $15,000 in annual Workers Compensation premiums are experience modified. And it takes three policy years to become modified.

The California Workers Compensation Insurance Rating Bureau has key information about the Unit Statistical report here: https://wcirbonline.org/wcirb/Employer_Guide/usr.html

If your Experience rating is over 1.00 then become unsettled now if you have never heard the phrase, “Valuation date”.

You know the feeling, or you’ve heard the idea that the California Workers Compensation system is out of control. It sort of is, and sort of isn’t. There are things you can do. The next post will explain the very first thing to do.

Hint; it’s easy. And you can start to get control.

Cheers,

Mike Vrchota

A lonely Nevada road

Sure, the ads can be humorous in their own way, but the issue is serious for business owners who want to stay in business, be profitable, and continue to employ folks in their local community, (which is the desire of most employers).

One step owners can do is take action and consult with an Insurance Broker to dig into their Work Comp plan to look for mistakes or overcharges. In some cases, significant funds have been recovered and positive changes have been made by qualified Brokers.

Recovering funds from previous errors, and making sure your Experience Modification and class codes are exactly where and what they should be may give some business owners the glimmer of light to see their way through challenging times, (like now). The methods and results being referenced can be seen at the Institute of Work Comp professionals, (IWCP), website: www.workcompprofessionals.com

Client Care Insurance is a Certified Work Comp Advisor agency helping California Employers, Human resource managers, (and those who help them), to quit losing money and develop powerful employee relationships for bottom-line improvement. Find a broker with a plan to put money back in your pocket.

Don’t move, improve.

Cheers, your Work Comp Wonk.

Last July the Bureau filed for a 23.7 pure premium increase, but the Commissioner of Insurance declined the Bureau’s advice and approved a zero premium increase. Various California carriers have raised rates, although, (generally), not to the extent the Bureau had advised.

Now, with the Bureau coming out again for a substantial advised adjustment, and with a Gubernatorial race coming next year, it could be that the Commissioner will again advise against any pure premium change.

The problem for California employers is that insurance carriers may be able to keep their rates mostly stable for the next 12-18 months, but at some point they’ll likely have to raise rates dramatically. After all, the Bureau is looking at all the claims data for all employers and policies in California, and their data tells them that carriers are sitting on ticking time bombs and the fuses are getting shorter by the minute.

So if you’re reading this, please call or write your broker and inquire about ideas and methods to reduce your Experience Modification. If your ex-mod is higher than 1.00, (which is just average – like a C in school), it’s possible you can make some moves and get your mod down. Do it, so you’ll be braced for impact. Cheers.

It’s being reported that the Workers Compensation insurance rating bureau, (www.wcirbonline.org), actuarial committee may recommend a 27% pure premium increase to its governing committee. This incease may be in July 2009.

This means that the claims and related information being analyzed by the WCIRB show that the premiums the insurance companies are charging are too low for the claims they are paying.
Workers Compensation Executive, an award winning publication which reports on the California workers compensation industry, (http://www.wcexec.com/articles/WCE01-20090317-001.html), reports on this meeting.

Pre-reform & Post-reform average premium rates

During the past several years, the Bureau has been able to make once a year premium recommendations. Those recommendations have been to lower premiums. Premiums were lowered as a result of the substantial reforms the California legislature adopted, (SB899, SB228, and AB227) under the direction of CA Gov. Schwarzenegger. These reforms brought about much needed sanity for the California Workers Compensation coverage system. The reforms allowed the insurance companies to lower premiums across the board. They also allowed employers to get some relief from the astronomical premium increases they were experiencing earlier this decade.

At the same time, all the key parties which administer the California Workers Comp system have been waiting for claims payment data to see how the reforms have affected the Workers Compensation marketplace. Meaning, how have the policy reforms worked in practice for the injured employees, and how have they affected the claims paying ability of the insurance companies. Now that data is pouring in. The article mentions that court decisions have also had an effect on the dollar amounts being paid to injured employees.  

To sum up, brace for impact now, in hopes that you can survive, if or when, you take a rate hit.
Work with your broker to make sure you have no open claims. If they don’t understand your urgency, help them, (or fire them).

This is going to be important for employers looking to keep their Workers Comp costs lower.
Your Agent/Broker CAN perform ex-mod maintenance. If they don’t know what that is, contact me, and look through prior posts to get informed about ex-mod improvement.

There are steps to be taken to guard your mod, if you like what you have now.
You can also improve it, if you have a higher ex-mod.

Please comment to let others know what you’re experiencing as it relates to your insurance company or your rates.

Cheers, your Work Comp wonk.

Her question is about Agents and Brokers offering Work Comp coverage.

I mentioned that the most common and well-known certification for Property and Casualty agents,

CPCU, requires only one overview class on Workers Compensation.  

So this brings up the question: from whom should you get your Work Comp coverage?

How will you know if the Broker/Agent is experienced in Work Comp?

Considering that many businesses devote more premium dollars to Work Comp coverage than any other coverage line, it becomes more important to consider how businesses obtain their coverage, and from whom.

In the same way that every business is different, every Broker is different.

And, even if a Broker has letters after his or her name, it doesn’t mean that he/she is a good match for your company.

So what do you look for?
Before I mention other things, it’s important to mention that all the knowledge in the world doesn’t help if the person you’re working with isn’t providing integrity and transparency.

Beyond those basic character standards, there is a certain base of knowledge your Agent/Broker should readily display. Without going into detail, I submit the following list as a basic checklist.

Because the California Workers Compensation system is so large and presents, (untold) complexity at every turn, my first suggestion is to work with someone specializing in Workers Compensation coverage. Someone who is even…wonkish about it.

Now whether you have a specialist or not, the broker should have extensive knowledge of how your experience modification is calculated. If you’re not currently modified, he/she should be able to forecast when you will be, and what your mod might be.

He or she should also provide detailed suggestions to get your mod lowered, if it’s been on the high side, (over 1.00). They should know exactly what a Unit statistical report is, when it’s filed, and by whom, (this is the key report your insurance company provides to the Workers Compensation Bureau).

The broker should know how important it is to make certain that you are classified properly, and that your estimated premium is equivalent to the current payroll and operations. If you’re a contractor they should regularly advise you to keep current with all your sub-contractors to make sure you’re receiving valid and complete certificates of insurance.

In addition, they should show a willingness to be your partner as it relates to your premium audit. Your premium audit, (and the resulting audit premium), can become an unwelcome surprise if your broker does not provide meaningful knowledge about how you can prepare for the audit.

Please consider this a short treatment of a substantial subject. To summarize, your agent/broker can be involved in regular steps to lower your premiums, (if they know what steps to take). If you don’t see them involved, then they either don’t know what to do, or they are comfortable just renewing your policy each year. Are you ok with that? Let me know your thoughts.

Cheers, your Work Comp wonk

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.

(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.

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 30^th 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.

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.