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SACRAMENTO, Calif. Insurance Commissioner Dave Jones adopted and issued a revised advisory pure premium rate, lowering the benchmark to $2.02 per $100 of payroll for workers' compensation insurance, effective July 1, 2017. This is 16.5 percent less than the average pure premium rate of $2.42 California insurers filed as of January 1, 2017. 

Commissioner Jones adopted the Workers' Compensation Insurance Rating Bureau (WCIRB)'s recommendation to lower the advisory pure premium rate mid-year. Mid-year pure premium rate adjustments are not the norm-new data reflecting a significant change in underlying workers' compensation costs is required before the commissioner will issue a mid-year adjustment.

Jones issued the mid-year advisory pure premium rate two weeks after a public hearing and careful review of the testimony and evidence submitted. His adoption is only advisory, as the commissioner has no rate authority over workers' compensation.

"A reduction in the pure premium rate reflects a reduction in the cost to insurers of providing workers' compensation insurance, which benefits California's business economy if insurers lower their pricing," said Insurance Commissioner Dave Jones. "However, there is no legal requirement that these insurers pass these cost savings onto employers, so workers' compensation insurers continue to file pure premium rates that are higher than the pure premium rate warranted by their costs."

The mid-year pure premium advisory rate reduction is based on insurers' cost data indicating workers' compensation insurers' medical costs were lower in 2016. Insurers' net costs in the workers' compensation system continue to decline as a result of SB 863 and other reform laws enacted by the Legislature and Governor Brown. The WCIRB claims the downward medical loss development is in part driven by continued acceleration in claim settlement, decreasing indemnity claim frequency, and lower than projected loss adjustment expenses.

The WCIRB's pure premium advisory rate filing demonstrated workers' compensation insurers continue to charge premiums, which are close to the estimated cost of providing benefits and adjusting expenses. The rates actually charged to employers; however, are on average lower than the rates filed by insurers.

The WCIRB will evaluate workers' compensation insurance costs again in the summer and fall of this year when it files its 2018 pure premium rate benchmark recommendation with the Department of Insurance. That filing will provide an opportunity to assess whether medical costs continue to be lower and what changes, if any, there are in other costs in the system.
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