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Rate Reductions – One Of Most Misleading Statements In WC


Rate Reductions

Rate reductions news published by a state rating bureau or NCCI is always a very positive statement in an industry led by negativity.

Picture of Hand Illustrating Rate Reductions Chart and Financial Elements

The rate reduction news is then re-published over and over again by various Workers Comp outlets.  There is still one piece of the puzzle that is lacking in the positive news.

Rate reductions are basically where a rating bureau analyzes actuarial data and subsequently publishes lower advisory or recommended rates for some or all of a state’s classification codes.

The buzz now is that California’s WCIRB (rating bureau) has recommended a 10.2% rate reduction which may seem contrary to the veiled WC crisis the state has been experiencing for the last seven years.

What does the reduction in advisory rates mean? – actually not much or even nothing.  I have written in this blog many times concerning (and there are many confusing terms) deviated rates or Loss Cost Multipliers that are filed by each carrier.  There are some that are over 300% of the actual advisory rates.

Hand Illustrating Rate Reductions Increase

In very simplified terms, an insurance carrier can negate an advisory rate by filing a rate increase that matches the rate decrease.   If I am ABC  WC Insurance Company and I do not wish to decrease my insurance rates,  I will change my deviated rate to match the decrease.

This situation does not happen that often.   However, this situation has happened even more severely as a major carrier increased their deviated rate extensively last year in CA.   Insurance carriers do have a team of actuaries that produce their own numbers that may not agree with the actuaries at the rating bureaus.

The insurance carriers are going to apply their own rates to remain profitable.

I will provide an example with numbers next week.   I try to keep most articles to 300 words or less and this one is getting a little long to read.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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