California WCIRB Rating Formula
The California WCIRB rating formula changes for January 2017 stood out in one of their recent press releases. The WCIRB (Workers Compensation Insurance Rating Bureau) is the rating organization for WC similar to NCCI.
Before I start to analyze the press release, the WCIRB personnel (for the most part) have been nothing but kind and helpful to me. Their educational conferences are always very informative.
The eye-catching phrase in the recent WCIRB press release alluded to the primary loss figure being changed to match the size of the employer. The primary loss figure for California is now set at $7,000.
Small companies took it on the chin in California two years ago with the elimination of the small employer adjustment. Will small employers take it on the chin again in 2017?
The WCIRB is not alone in making major changes to the rating formula. A series of articles earlier in this blog covered the major changes made by NCCI to their rating formulas in 2013.
According to the WCIRB press release there are two areas that will be the most affected by the changes:
- Allow the WCIRB to issue debit modifications, in specified circumstances, excluding the unaudited payroll for policyholders who are uncooperative at the time of a final audit. One has to ask as to what is uncooperative and who determines when a company is so called “being uncooperative. Also, what would be the level of unaudited payroll if there are no payroll figures on which to base this figure?”
- The second replaces the fixed $7,000 primary and excess loss split point with a variable split point that varies based on the size of the employer. A variable split point enhances the accuracy of the experience rating formula, especially for smaller employers; reduces volatility and provides flexibility for simplifying the experience rating formula in future years. One cannot help but notice the mention of small employers in this second point.
As we all know the per-unit cost of risk under the rating formulas is much higher for smaller companies than larger ones. I hope the new variable split point changes will not be in the same vein.
I will update this post or add additional posts as the new rules for the California WCIRB rating formula changes are published.
Article provided by James J Moore, AIC, MBA, ChFC, ARM. All articles are original content. Check out the full website at www.cutcompcosts.com