SELECTED INDICATORS IN WORKERS’ COMPENSATION: A REPORT CARD FOR CALIFORNIANS
Workers’ Compensation Premiums
Pure Premium Advisory Rates
Minimum Rate Law and Open Rating
In 1993, workers’ compensation reform legislation repealed California’s 80-year-old minimum rate law and replaced it beginning in 1995 with an open-competition system of rate regulation in which insurers set their own rates based on “pure premium advisory rates” developed by the WCIRB. These rates, approved by the Insurance Commissioner (IC) and subject to annual adjustment, are based on historical loss data for more than 500 job categories.
Under this “open rating” system, these recommended, non-mandatory pure premium rates are intended to cover the average costs of benefits and loss-adjustment expenses for all employers in an occupational class and thus provide insurers with benchmarks for pricing their policies. Insurers typically file rates that are intended to cover other costs and expenses, including unallocated loss-adjustment expenses.
The chart on the following pages shows the history of the workers’ compensation pure premium advisory rates since the 1993 reforms.