Insurance Commissioner Dave Jones adopted an advisory average pure premium rate of $2.74 per $100 of employer payroll for workers’ compensation rates effective January 1, 2015. The adopted amount is a 2.2% increase, but lower than that proposed by the Workers’ Compensation Insurance Rating Bureau of California (WCIRB). The WCIRB’s proposed advisory average rate was $2.77 per $100 of payroll. After a public hearing and careful review of the testimony and evidence submitted, the Department of Insurance recommended adoption of a pure premium rate amount lower than the WCIRB on the basis that a greater reduction in medical losses should be used in the actuarial model due to the anticipated savings from SB 863 (De León) signed in 2012.

The WCIRB’s proposed advisory average pure premium rate is 7.9 percent ($2.77 per $100 of payroll) above the industry’s average filed rates as of July 1, 2014 and the adopted pure premium rate ($2.74 per $100 of payroll) is 6.7 percent above the industry’s average filed rates as of July 1, 2014.

Commissioner Jones, the WCIRB and the public members’ actuary all agree that the overall impact of SB 863 continues to result in savings for the workers’ compensation system. The California Department of Insurance continues to observe that medical and indemnity losses are outpacing wage growth and consequently, the average advisory pure premium will increase in 2015.

The commissioner’s pure premium decision is advisory only. Pursuant to California law, the commissioner does not set or have authority over workers’ compensation insurance rates. The commissioner’s advisory pure premium rate is not predictive of what an individual insurance company may charge its policyholders because the review of pure premium rates is just one component of insurance pricing.