Insurance Commissioner Rejects WCIRB’s Recommended COVID-19 Premium Surcharges in 2021 Pure Premium Rate Filings

In an earlier blog post, we announced the Workers’ Compensation Insurance Rating Bureau (WCIRB) had recommended industry wide COVID-19 premium surcharges for the Insurance Commissioner to approve in the 2021 Pure Premium Rate Filings.

The WCIRB’s recommendations were to apply a blanket COVID-19 surcharge ranging between 1-24 percent relative to an employer’s industry, regardless of the employer’s actual COVID-19 claims.

On November 25, 2020, California Insurance Commissioner Lara rejected the WCIRB’s recommendation to impose blanket COVID-19 premium surcharges in the 2021 Pure Premium Rate Filings. Here is more detail directly from the WCIRB release:

Insurance Commissioner Issues Decision Regarding 2021 Pure Premium Rate Filing

“In his Decision, dated November 24, 2020, the Insurance Commissioner approved advisory pure premium rates that average $1.45 per $100 of payroll. The average approved 2021 advisory pure premium rate, which does not reflect a provision for projected COVID-19 claim costs, is 4.6 percent below the average approved January 1, 2020 advisory pure premium rate. The approved January 1, 2021 advisory pure premium rates differ from the WCIRB’s proposed pure premium rates, which averaged $1.50 per $100 of payroll excluding the provision for COVID-19 claim costs. The difference between the WCIRB proposed and CDI approved advisory pure premium rates is due to somewhat different assumptions regarding medical loss development and future claim severity trends.

While the Insurance Commissioner’s approved advisory pure premium rates do not reflect a provision for projected COVID-19 claim costs on 2021 policies, his Decision indicated that, “[i]nsurance companies are encouraged to take under advisement the actuarial analyses provided in the proposed decision as well as ongoing developments when evaluating whether and to what extent an adjustment for the costs of COVID-19 should be incorporated into a given insurer’s rate filing.” The CDI’s Proposed Decision includes a Table of Recommended COVID-19 Additive Adjustment per $100 of Payroll that average $0.05 per $100 of payroll. The Table from the Proposed Decision was not adopted by the Commissioner in his Order.

The Commissioner’s Decision also directed insurers to clearly identify any filed rate or rating plan component that includes an adjustment for COVID-19 in rate filings submitted to the CDI. Finally, the Insurance Commissioner directed the WCIRB to collect data on the aggregate premium charged for any rate or rating plan component that includes an adjustment for COVID-19.”

As noted in the release, the Insurance Commissioner’s decision and electronic files containing the approved January 1, 2021, advisory pure premium rates may be downloaded from the Filings and Plans section of the WCIRB website.

Insurance carriers do have the option to include COVID-19 charges into their own rate filings and retain ultimate discretion to pick what business to write and how to price premiums relative to the risk and their own filed rates.

If you have questions regarding how this may impact your Workers’ Compensation renewal, please reach out to your insurance broker or feel free to contact me.

About Kevin Mui

Kevin Mui has been working in the insurance field for the past decade specializing in Workers’ Compensation and risk management across multiple industries. He mitigates the costs of potential and existing claims with preventative risk management techniques, and provides ongoing claims advocacy for his clients. Kevin has a background in financial advising and obtained his Life & Health license, along with the Series 6 and 63 securities licensing. He graduated from the University of California, Riverside with a Bachelor’s of Science in Business Administration.

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