Double-Digit Benchmark Increase Rejected

Rejecting the Workers' Compensation Insurance Rating Bureau's (WCIRB) call for a 16 percent increase in the benchmark for determining workers' compensation costs, California Insurance Commissioner Steve Poizner accepted a more moderate five percent increase to reflect higher medical and claim adjustment costs to the system.

In an effort to more accurately define the estimated change in claim costs that develop in the workers' compensation system, Poizner also said that the "Pure Premium Advisory Rate" has been renamed the "Workers' Compensation Claim Cost Benchmark." He said this term will be used in the future, as it more accurately describes its role in the workers' comp pricing system.

Poizner justified his decision by stating, "Last year, experts predicted that loss adjustment expenses would increase dramatically. They did not. This year, experts have predicted accelerating increases in medical costs. Given the accuracy of past forecasts, I will wait for clear and compelling data confirming such increases before significantly increasing the Workers' Compensation Claims Cost Benchmark."

Poizner said that while his department has no authority to set workers' compensation rates, he advised workers' compensation insurance companies to be cautious if they seek to adjust rates. His track record proves he means what he says.

Including today's adjustment, the Workers' Compensation Claims Cost Benchmark has fallen 63.4 percent since its high in 2003. In May 2008, Poizner cited forecasted marketplace stability as a reason for not issuing an interim pure premium rate advisory. It was the first time in six years that an interim pure premium rate advisory was not issued by a California insurance commissioner. In Jan. 2008, Poizner recommended no change in workers' compensation insurance rates based upon his review of the data provided by WCIRB at that time.

"Despite this adjustment to the benchmark, it is clear that insurance companies remain profitable in California and still have room to reduce the premiums they charge," said Poizner. "Insurers should work with their employer customers to control the cost of workers' compensation insurance and help California businesses to remain financially healthy and competitive."