Insurance Commissioner Ricardo Lara has adopted and issued a revised average advisory pure premium rate, lowering the benchmark to $1.52 per $100 of payroll for workers’ compensation insurance, effective January 1, 2020.
This marks the ninth consecutive reduction to the average advisory pure premium rate benchmark since January 2015.
“Reduced costs should translate to real savings for California’s businesses while preserving protections for workers,” said Commissioner Lara. “I encourage insurers to continue to reduce their prices to reflect the lower costs.”
With an average filed pure premium rate of $1.99 per $100 of payroll as of July 1, 2019, insurers were applying pure premium rates that were approximately 19.2 percent more than the corresponding average advisory pure premium rate of $1.67 approved by the Commissioner as of January 1, 2019.
The indicated average advisory pure premium rate level of $1.52 approved by the Commissioner is about 23.6 percent lower than the industry filed average pure premium rate of $1.99 as of July 1, 2019.
Lara’s decision results in an advisory pure premium rate that is below the $1.58 average rate recommended by the Workers’ Compensation Insurance Rating Bureau (WCIRB) in its filing. Lara issued the advisory rate after a public hearing on October 14, 2019, and careful review of the testimony and evidence submitted by stakeholders. The pure premium rate is only advisory, as the Legislature has not given the Commissioner rate authority over workers’ compensation rates.
The WCIRB’s pure premium rate filing demonstrated continued decreases in costs in California’s workers’ compensation insurance market. The pure premium advisory rate reduction is based on insurers’ cost data through June 30 of this year. Insurers’ net costs in the workers’ compensation system continue to decline as a result of SB 863, SB 1160, AB 1244, and AB 1124 enacted by the Legislature and Governor Jerry Brown.
The WCIRB notes continued favorable medical loss development including acceleration in claim settlement rates, and continued decline in pharmaceutical costs and lien filings.