California Insurance Commissioner Ricardo Lara has ordered that the state’s average benchmark workers’ compensation rate be cut by 2.1%, starting Sept. 1.
The decision rejected the Workers’ Compensation Insurance Rating Bureau’s recommendation that the benchmark rate be raised by 0.9%, citing a slight uptick in claims costs and claims-adjusting costs.
The benchmark rate, also known as the pure premium rate, is a base rate that insurers can use to price their policies. It only includes only the cost of claims and claims-adjusting costs and does not take into account other forms of overhead and profits.
Each class code gets its own pure premium rate, and some classes may see increases and others further decreases. Every employer’s premiums will differ depending on their claims experience, industry and location.
Also, insurers are not required to use the pure premium rate and are free to price their policies as they see fit.
The decision is a further reflection of the low pricing environment for workers’ compensation, a rare bright spot in an insurance market that has seen hefty rate increases in other lines, such as commercial property and liability coverage.
The average benchmark rate will fall to $1.38 per $100 of payroll, down from the current $1.41.
Reasons behind Lara’s decision
Factors that the commissioner cited as influencing his decision include:
- The continuing decrease in the number of medical services associated with each workers’ comp claim, and
- A continuing decline in the percentage of claims with permanent disability benefits.
The new rate applies to policies incepting on or after Sept.1, 2024.
If you have questions about your coverage, please give your agent a call.
Tags: Leaders' Choice Insurance Services, workers' compensation rate