WCIRB Suggests 29.6% Increase in Rates

It is unfortunate that the Commissioner of Insurance (Poizner) has repeatedly ignored previous suggestion of rate increases as it would hurt his chances of being Governor, but since he has ignored the warnings of the Workers Compensation Insurance Rating Bureau (WCIRB) (which is an apolitical, quasi-governmental actuarial department) it has come to consumers getting sticker-shock from a suggested increase of this magnitude.

I have always believed that Commissioner of Insurance should not be an elected office as much (insert all) of the time the person elected 1) Has no clue about how insurance works, even well after this person is elected, 2) Uses the office as a stepping stone to higher office (See Quackenbush,Garamendi, Poizner, etc.)  3) Seeks to pander to their constituency instead of disclosing the true facts about the state of the marketplace to the consumer.

Although Dale Debber makes arguments to the contrary, we have seen claims cost rise and frequency maintained which will push pricing up. You need not look any further than the past 3 years combined loss ratios of carriers in the state to end up with the same conclusion that the WCIRB came up with.

FLASH REPORT!

WCIRB Says 30 Point Rate Increase for Workers’ Comp

“It’s going to be in the ball park of 30%,” chief actuary Dave Bellusci tells Workers’ Comp Executive. “But I wouldn’t be surprised if it’s over.” Workers Compensation Insurance Rating Bureau (WCIRB) staff still has to finalize the calculations before preparing a pure premium advisory rate recommendation for the Governing Committee, it says, so the final numbers could still change a bit. But a 30 point increase is the general consensus of its Actuarial Committee. This comes against a backdrop where the WCIRB’s veracity and integrity are continuing to come under question.

“A 30 point increase is beyond all reason” says Dale Debber, principal of Compline and publisher of this newsletter, and recognized workers’ comp expert. “It will drastically affect California business deterring increased employment during these tough economic times. If taken, it will likely lower the collectable payroll, sales, and incomes taxes for the State California. Worse, this comes at a time when it will necessarily impact the legislature’s budget negotiations.” Debber says, “It will raise the prices of practically everything for all consumers.” The industry is trashing the Schwarzenegger reforms

Debber opines that WCIRB management has a history of putting accurate facts together in such a way as to lead others to an inaccurate conclusion. Compline, he says will soon publish a report studying these issues.

WCIRB says the current calculation does not include a separate element for the impact of the Almaraz/Guzman and Ogilvie decisions, as it is assumed that the impact of those cases is already in the underlying data. The WCIRB is sticking to its previous story and continues to peg that impact at 5.8%.

For its part, WCIRB says the industry’s experience is developing consistent with WCIRB’s prior recommendation, Bellusci notes, but says an increase over the prior filing is warranted due to another year of inflation and a lower than projected frequency decline in 2009. The latter point prompted the committee to alter its loss development methodology to base it on the 2009 trend data rather than a two-year average. The committee also tweaked the loss development methodology to account for an industry-wide slowdown in claims settlement rates, but is sticking with its current methodology for calculating loss adjustment expenses.

Guy Teafatiller

guyt@vanbeurden.com

Vice President | Kingsburg