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California WCIRB Rating Formula Major Changes

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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.Diagram of California WCIRB Rating Formula Changes

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.

Hand Holding Calculator California WCIRB Rating Formula Icon
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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.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt 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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