California’s Complex Workers Comp Situation Deepens
California’s complex Workers Comp situation deepens with a recommendation by the WCIRB.I had posted a few week ago regarding the 24%+ rate increase that was recommended by California’s WCIRB (Workers Compensation Insurance Rating Bureau). There has been a large amount of discussion in the press about the upcoming increase.
I noticed in a few articles where even a small decrease was recommended and there were extremely diverse estimations of what increase was needed. The danger of underestimating the rate increase is that a snowball effect will occur when the rates are underestimated over a long period of time. California could be creating an off-the-books crisis. If two workers compensation rate increases fall short of say 20% for two years, then there will a need for a 40%+ increase sooner or later.
The danger of overestimating the basic rate increase is overburdening employers with an unneeded increase further stymieing a recovery from a very rough economy. The insurance market would likely head back to the 1990’s and early 2000’s with the State Fund (SCIF) having almost all of the insurance market A competitive workers compensation insurance market is always better than a virtual insurance monopoly by the State Fund.
The WCIRB and the Insurance Commissioner must perform a very tough balancing act to keep the market healthy. My advice is to take the brunt of the 24% increase and very carefully monitor the market for the next round of rate recommendations.
Why do I keep bringing up California in this blog? The events happening in California will be coming to a rating bureau near you. California’s Workers Compensation system can be a test case for the rest of the country. West Virginia is also a test case for a workers comp system coming out of a State Fund to an open market.
Do you see the similarity? California and West Virginia are both systems that have just gone from monopolistic states to an open market. How they survive may be the future for other states. The best way to know the future of the workers comp market in your state(s) is to observe what is happening in similar states.
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