Many employers have had a hard time following how their work comp ex mods have been calculated. In one step to make the process more clear, for 2010, California will use a single “split point” of $7,000 for each work comp claim into primary and excess components rather than the current formula for splitting claims.
Since primary losses effect an employer’s ex mod more than excess losses, this change makes it important for an employer to do what they can to hold down the first dollar costs of each claim. Any amount saved below $7,000 will help save on their ex mod and their premiums for 3 years to follow.
We also know from data released earlier this year by the WCIRB that if an injured worker returns to work the day after an injury, the average claims cost is $870 but if there is lost time paid for by temporary disability the average claims cost grows to $11,761. If there is even a minor permanent disability, the average claims cost grows even further to $38,390, and a major permanent disability claim costs, on average $140,680.
On November 9, 2009, the Insurance Commissioner issued a decision approving several changes to the experience rating formula including updated credibility values (“B” and “W” values) and the revised mechanism for splitting the first $7,000 of claims into their primary and excess components. These changes are intended to simplify the experience rating system and improve its predictive accuracy.
The WCIRB’s analysis of 2010 experience modifications recently issued has shown that the majority of experience rated policyholders are seeing lower experience modifications than would otherwise be the case as a result of these formula changes. Fewer than 40% are seeing an increase, however, roughly 6% of experience rated policyholders are seeing increases in their experience modifications of between 11 and 20 points, and 2% are seeing increases of more than 20 points due to these formula changes. The small number of policyholders experiencing large increases are generally employers with worse than average underlying loss experience.
When you receive your 2010 experience rating, please feel free to call Don Dressler Consulting to have us review your rating form.
Insurer Rate Increases Appear Moderate
for 1/1/2010
California's largest workers' compensation carriers have filed rates in November that ranged from no change to a 10% increase.
Liberty Mutual's eight subsidiaries exhibited the most aggressive stance, filing for no change in pure premium rates. On the other hand, American International Group's property and casualty subsidiary, Chartis, filed for an 8% increase in next year's workers' compensation rates. Security National Insurance Co. filed a 16.5% rate increase.
The Hartford Financial Services six insurance subsidiaries filed for a 6.4% rate increase, while four carriers belonging to the CNA Insurance Group filed for 10% rate increases. State Compensation Insurance Fund filed for a 5% increase and Zenith National Insurance Co. filed for a 2.7% rate hike.
More than half the 85 companies that have filed through December 1 are planning rate increases, but 10 intend to lower rates. And 25 companies are not changing rates.
Pushing to ensure it remained competitive as a business, several subsidiaries within the Chubb Group of Insurance Companies proposed decreased rates, led by an 8.9% drop scheduled by Great Northern Insurance Co. Chubb has not been as aggressive as other carriers in slashing rates in the past five years
The Workers' Compensation Insurance Rating Bureau had recommended a 22.8% increase in the pure premium rate, pointing to increasing medical losses and the danger of a return to subjective permanent disability ratings due to the Workers' Compensation Appeals Board's rulings in Almaraz/Guzman and Ogilvie. But Insurance Commissioner Steve Poizner rejected any increase, saying those WCAB decisions are still under appeal, and also that insurers had not done enough to take advantage of opportunities for cost savings created by the 2004 reform legislation. Poizner’s ruling is advisory only.
Keep on top of your open work comp claims …to control costs
The importance of staying on top of open workers’ compensation claims, and getting injured workers back to work was demonstrated once again in the latest report from the California Workers’ Compensation Institute. For all types of employers and industries covered by workers’ compensation insurance, 72% of claims are closed within 12 months, 82 % are closed within 24 months and 85 % are closed within 36 months. But look at the average cost of claims: at 12 months – average cost of a lost time injury claim = $9,710 according to the latest data. But at 24 months – average cost = $19,316 and at 36 months- average cost = $26,416.
New resource for training
I hope you will have time to check out my latest effort: www.calofficesafety.com With the help of medical specialists, a sports trainer and others, we are now offering an Office Injury Prevention Training Kit to deal with repetitive motion injuries.
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