You Get a 1.8% Decrease — Which Totals a 37% Increase in Rate …

This is what has unfolded after the Department of Insurance repeatedly refused to believe or accept suggested rate changes over the past 4 years or longer.

Basically no elected official would ever tell the public that the rates for workers compensation coverage in the state of California were going up substantially. So they did what comes natural and ignored the findiing of the WCIRB. This could only go on for so long, until the suggested rate meant nothing (which has kind of been the case with the market doing whatever it liked regardless).

So the dilemma had been: “How do we raise rates substantially without anyone noticing?”

The answer: Change the way you report the rates so that it looks like a 1.8% decrease.

And that is just what has taken place. The WCIRB was instructed to use the charged rates (or rates companies actually charge in the real world) instead of coming up with a loss rate using all the data they gathered from the companies doing business in the state.

Excerpt from an Emailed Flash Report from the Workers Comp Executive Magazine filed by Dale Debber:

Couched as a flat rate of $2.30 it is just below the Workers’ Compensation Insurance Rating Bureau’s recommendation of a rate decrease of 1.8%. The 1.8% decrease used a calculation based on currently filed rates to recast a 39.9% increase as a decrease. Now, understanding the calculation is open to criticism, it has been further obfuscated into a blended rate for all employers which is essentially meaningless.

This past spring, Workers Compensation Insurance Rating Bureau, a private organization owned and run by insurance companies licensed and doing the work of the Insurance Department, filed and then withdrew a 39.9% increase for 2012. Then, Commissioner Jones ordered that WCIRB stop benchmarking the pure premium rates from the previous approved rate and instead benchmark it against the average pure premium rates that carriers have currently filed. That’s how they arrived at the 1.8% decrease or a $2.33 average rate, which has been approved now as a $2.30 rate.”

Now I know that some of you are scratching your head, but let me put it planely to you. THIS REPRESENTS A 37% INCREASE IN THE SUGGEST RATES FOR WORKERS COMPENSAITON ACROSS THE BOARD. Although it was announced by the Department of Insurance as a 1.8% reduction in rate (using the “new” calculation method).

Bottom line, if the Insurance Commissioners office was not an elected position, they would have made movves during the past 4 years to gradually increase rates and save the consumer from the sticker shock they are going to get starting at their next policy term. Granted, it will effect some companies greatly (the ones who actually base their rates on the suggested rate and add costs to get to their rates), and some will not be effected too greatly becausee the saw the ruse of the DOI artificailly holding the rates down and charged higher rates than suggested because they chose to believe the numbers from the WCIRB year-after-year.

It’s like turning in a mail in rebate card on a product and getting a bill for the amount of the rebate in return.  Yeah! your 1.8% reduction earns you a 37% increase.