California advisory board suggests rates remain generally unchanged
The actual proposal is 1.8 percent less than the average of insurer filed rates as of July 1. But the effect of a revision in how the rates are calculated equates to essentially unchanged rates.
Insurers are not obligated to charge the rates ultimately approved by the insurance commissioner. In prior filings, the WCIRB had proposed rates that were benchmarked to the approved pure premium rates, "however, this has led to a misunderstanding among the public that a change in the approved pure premium rates will have a direct and commensurate impact on the rates filed and charged by the insurers," the WCIRB said. "In order to mitigate this misunderstanding and provide more meaningful information regarding insurer rates, the pure premium rates proposed in this filing are benchmarked to the average insurer filed pure premium rate and additional information regarding industry average filed and charged rates is provided in the WCIRB's filing."
The filing follows premium increases of about 10 percent in the past four years, according to the bureau. However, they are still about 60 percent less than they were in 2003.
Even though projected cost levels for 2012 are below their pre-reform highs and the proposed rate filing is less than the industry average filed pure premium rate, the proposed rates "reflect significant deterioration in projected losses and loss adjustment expenses as well as less optimistic economic forecasts as compared to one year ago," the WCIRB said. The bureau attributed the deterioration to:
- A significant increase in projected allocated loss adjustment expenses.
- Continued adverse loss development on recent accident years.
- Increased claim frequency in the 2010 accident year.
The average allocated loss adjustment expenses per indemnity claim has increased by 55 percent since 2005, the bureau said. "Among the factors leading to this increase are an increase in the volume of medical liens, the Ogilvie and Almaraz/Guzman decisions, and an increase in the rate of claimant legal representation."
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September 6, 2011
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