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Work comp rates go up 2.8 percent in 2012

Recent reports in the area of workers' compensation defense law reveal a good news/bad scenario for California employers. The bad news? The cost of work comp premiums is going to rise in 2012. The good news? The amount of this rate increase is relatively minor.

According to a released statement by the California Department of Insurance, the top 100 workers' compensation insurance carriers, which together comprise 96.7 percent of the state's work comp insurance market, are increasing their pure premium/base rates by 2.8 percent.

What makes this development significant is that in 2012 the Department of Insurance officially launched a new practice whereby the Insurance Commissioner announces an advisory benchmark for annual work comp rates that insurers can either abide by or disregard.

Specifically, Insurance Commissioner Dave Jones advised work comp carriers to consider charging a premium rate equivalent to $2.30 per $100 of employer payroll back in November.

Based on the 2.8 percent increase in premium rates, the bulk of work comp carriers chose to follow Jones' recommendation.

"This past year we improved the pure premium benchmark process by establishing a benchmark based on what is happening in the market," read Jones' official statement. "In November, I announced the approved advisory pure premium benchmark that would be effective in 2012. A significant number of insurers, representing a significant share of the overall market, are using the approved advisory pure premium rates."

In 2003 and 2004, the State Assembly introduced key reforms to the state's workers' compensation system to cuts costs and reduce the cost of work comp premiums for employers. To that end, the reforms have been successful. In 2003, premium rates were $6.29 for every $100 employer payroll, while in 2008 premium rates were $2.16 for every $100 employer payroll.

Last year, work comp premium rates were $2.37 for every $100 of employer payroll, a reflection of rising medical costs.

Stay tuned for further developments from our workers' compensation defense blog ...

This post was provided for informational purposes only and is not to be construed as legal advice.


California Department of Insurance Press Release, "Workers' compensation rate filings indicate that significant number of companies are using insurance commissioner's advisory pure premium rates" Jan. 17, 2012

The Los Angeles Times, "Employers paying a bit more in workers' compensation premiums" Jan. 17, 2012

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