Workers’ Compensation Archives

APRIL 4, 2018: California employers are in line for a seventh straight cut in their workers’ comp rates. The Workers’ Compensation Insurance Rating Bureau’s governing committee members approved a filing for a 7.2% rate cut for policies incepting on or after July 1, 2018.

If this proposal is ultimately adopted, the cumulative rate cuts since Jan. 1, 2015 will be 35%.

The Bureau is a private, but quasi-governmental organization financially supported exclusively by insurance carriers in whose interests it operates.

The committee’s insurer members heard a proposal from the public members’ actuary for a deeper 11.8% cut in rates. The difference stems from alternate methodologies for projecting medical loss development and the trending methodologies used to develop his rate projection. The lower 7.2% cut passed with the unanimous support of the carrier representatives. Both public members present opposed the motion and expressed support for the deeper cut.

The proposed rate cut is based on the industry’s year-end 2017 experience that shows a continued decline in the projected loss ratio for these July 1 policies. The data show continued improvement not only on the medical front, but also some improvement on indemnity benefit costs including temporary disability benefits. Loss adjustment expenses (LAE), however, remain high and are limiting the size of the rate cut.

Driving much of the improvement in the experience is the state’s accelerating claim settlement rate. The settlement rate had been improving for several years but the pace of settlements accelerated significantly through the end of 2017. The state’s improved claims environment that is encouraging the closure of claims stems from the SB 863 reforms as well as subsequent anti-fraud initiatives targeting workers’ comp liens. Last year’s increase in settlements followed the dismissal of nearly 300,000 liens.

The Baker workers’ comp reforms significantly increased permanent disability benefits for injured workers, while introducing new dispute resolution processes that may finally be impacting the system’s TD costs. Feeding into the settlement rate as well is the impact of the subsequent lien reforms from SB 1160. The measure has reduced the number of new liens coming into the system by 40%. This measure alone amounts to savings of roughly half-a-billion dollars.


Primary Factors in the July 1, 2018 Rate Cut

Lower Loss Development: -6 percentage points

Inclusion of the 2017 Accident Year: -1 percentage points

New Drug Formulary: -0.5 percentage points

Loss Adjustment Expenses (LAE): +0.5 percentage points



Information source:

JANUARY 5, 2017: The WCIRB has completed an analysis of allocated loss adjustment expense (ALAE) cost trends in California workers’ compensation. The major findings of the report are:

  • Average ALAE cost per claim have increased by more than five-fold in the last 25 years. In addition, despite the implementation of SB 863 in 2013, average ALAE costs have increased by 20% since 2012.
  • California ALAE costs as a percentage of losses are by far the highest of any state and more than twice the countrywide median. Other interstate comparisons suggest that the differences in California ALAE costs are largely related to activities that occur later in the life of a claim.
  • Recent increases in ALAE levels are related to both increases in the frequency of claims involving significant ALAE costs in addition to the average ALAE cost on those claims. Although the majority of claims with significant ALAE costs occur in the Los Angeles Basin area, recent increases in ALAE costs have occurred broadly throughout California.
  • Cumulative injury claims are much more likely to involve significant ALAE costs than non-cumulative injury claims and these types of claims have been growing faster than other types of claims, indicating that the recent growth in cumulative injury claims is likely a key driver of recent increases in ALAE levels.
  • The proportion of claims with significant ALAE costs that have been settled by compromise and release has more than doubled since 2010. Claims settled by compromise and release incur significantly higher ALAE costs than claims closed by other means, suggesting that the recent increases in these types of claims is a factor driving recent increases in ALAE levels.
  • Based on a recent WCIRB claim survey on ALAE costs, a majority of permanent disability claims involve an applicant’s attorney and Workers’ Compensation Appeals Board appearances. In addition, significant portions of permanent disability claims involved depositions, liens, disputes for which no lien had yet been filed (i.e., “pre-liens”), surveillance or investigation costs, or costs of preparing subpoenaed records.

The full report is available in the Research and Analysis section of the WCIRB website ( and at the link below:

WCIRB Research Forum

The WCIRB will hold a WCIRB Research Forum webinar to discuss the report as well as the WCIRB’s 2016 Senate Bill No. 863 Cost Monitoring Report released last November. Register at the link below to attend the webinar.

Date: Thursday, January 19, 2017
Time: 10:00 AM – 11:00 AM PT
Register now>

For those unable to attend the live webinar, a recording will be posted on the WCIRB Research Forum page of the WCIRB website following the event.


 Page 2 of 2 « 1  2