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

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.

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.

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 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.