Thursday, May 12, 2011

CA WCIRB, Rates, Absurdity

WorkCompCentral reported this morning that the California Department of Insurance (DOI) advised the Workers' Compensation Insurance Rating Bureau (WCIRB) that its proposed "informational filing" for pure premium rates was closer to an interim rate filing and would require a public hearing before disclosure.

The WCIRB wants to inform its member companies, and the public, that rates in the Golden State should go up about 40% after being depressed for years despite rate filings in the past 3 years seeking successive increases - all of which had been denied by the Schwarzenegger Administration led DOI and former Insurance Commissioner Steve Poizner (who ran unsuccessfully for Governor in this last election).

But really folks, does any of this matter? Rate filings are advisory in nature any how ... and with the national combined ratio now running 115%, is it any wonder that rates eventually will head skyward, and rather dramatically?

The DOI in California (and in many states) has become just a political system rather than a regulatory body. The job of the Insurance Commissioner is to get re-elected, not so much to regulate the insurance industry in any responsible manner.

The bottom line is that rates must go up, and are heading up by most responsible and disciplined carriers, though not in the fashion the WCIRB is proposing. Ultimately rates, and premiums, will accelerate because the long tail nature of claims eventually catches up to cash flow from premiums. Unemployment takes an unusually hard toll on work comp carriers as associated payroll, that drives premium income,  is way down.

Though the industry is still showing a good surplus, that can't last long as claims from years past start eroding reserves.

Eventually we will see some meteoric increases in premiums, and perhaps another "reform" agenda?

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