The WCIRB Governing Committee met this month to review the WCIRB Actuarial Committee’s analysis of December 31, 2018, California workers’ compensation loss and loss adjustment expense experience.
Following review and discussion of the latest data and analysis, the Committee conferred on whether to direct the WCIRB to submit a mid-year 2019 advisory pure premium rate filing to the California Department of Insurance (CDI).
Pure premium rates by definition reflect indemnity and medical losses and loss adjustment expenses only, are advisory and are not required to be adopted by insurance companies. In California’s open rated workers’ compensation insurance market, insurers are largely free to file their own rates and rating plans directly with the CDI.
Recognizing that mid-year filings and adjustments to advisory pure premium rates can be disruptive to employers, agents and brokers as well as insurers, the Committee established a guideline in 2011 stating that mid-year filings would generally not be made by the WCIRB unless there was highly unusual volatility in experience or major legislative, regulatory or judicial action.
Based on the December 31, 2018, experience and analysis, the Committee determined that the overall improvement in experience since the January 1, 2019, approved pure premium rates was more moderate, approximately $0.06 per $100 of payroll or less than 4 percent, than in recent prior years and did not warrant a mid-year 2019 pure premium rate filing.
The Committee also noted in its determination that there are concerns relating to indicated increases in average 2018 claim severities as well as potential distortions in loss development arising from the recent dramatic reductions in pharmaceutical costs.
The Committee instructed the WCIRB to further analyze these areas in preparation for the January 1, 2020, annual pure premium rate filing to be presented to the Committee in August for submission to the CDI.
The Actuarial Committee’s analysis of December 31, 2018, experience is publicly available to all stakeholders as are the documents from today’s Committee meeting, including the agenda and materials presented at the meeting, on the Committee Documents page of the WCIRB website.