California Insurance Commissioner Steve Poizner on Friday announced a 5 percent pure premium increase for workers' compensation, less than a third of the increase proposed by the state Workers Compensation Insurance Rating Bureau.

The commissioner said his decision to opt for a lower increase was due, in part, to the inaccuracy of the past predictions for the market.

"Last year, experts predicted that loss adjustment expenses would increase dramatically. They did not," said Commissioner Poizner. "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."

The Workers Compensation Claims Cost Benchmark is a new term being used by the state Department of Insurance, instead of the Pure Premium Advisory Rate, because the department believes it more accurately defines the estimated change in claims costs used to develop the rate.

"Despite this adjustment to the Claims Cost Benchmark, it is clear that insurance companies remain profitable in California and still have room to reduce the premiums they charge," said Mr. 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. While I have no control over workers' compensation insurance rates, I nevertheless encourage employers to work with their insurance agents and brokers to shop for the best prices."

The American Insurance Association said the commissioner's proposed rate was "reasonable," according to spokesperson Nicole Mahrt. "The commissioner considered that insurers are facing higher costs due to escalating medical expenses, while employers are facing obvious difficult economic conditions," she said. "Now each company will take this benchmark and apply it to their book of business."

The rate proposed by the commissioner is not a mandate, although companies traditionally have stayed relatively near it. Including this recent change, pure premium rates have declined 63.4 percent since the enactment of market reforms starting in 2003.

"Thanks to the historic reforms, California still enjoys a competitive workers' compensation market," Ms. Mahrt said. "It's important we continue to protect those reforms and let them work so the system can remain predictable even during a time when costs are escalating."

Special Reports /

Calif. Raises, Renames Pure Premium For Comp

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