SACRAMENTO – On Wednesday California Insurance Commissioner Dave Jones adopted and issued a revised workers' compensation insurance advisory pure premium rate, lowering the benchmark to $1.74 per $100 of payroll for workers' compensation insurance, effective July 1, 2018.

Commissioner Jones has reduced the benchmark rate by 36.5 percent since January 2015, when the average pure premium rate was $2.74 per $100 of payroll.

With an average filed pure premium rate of $2.22 per $100 of payroll as of January 1, 2018, insurers are on average applying pure premium rates that are 27.6 percent more than the indicated pure premium rate approved by the commissioner Wednesday.

Even after considering the industry's extensive use of rating plan credits, industry profitability appears to be substantial as a percentage of premium.

"It is time insurers do the right thing and pass along more cost savings to California employers who deserve to share in the benefits cost reductions have brought to the workers' compensation system," said Insurance Commissioner Dave Jones. "In addition to the cost reductions that have led to higher profits, insurers are also benefiting from the federal income tax break, which should result on average in about another five percent decrease in premiums."

Commissioner Jones' order sets the advisory pure premium rate below the $1.80 average rate recommended by the Workers' Compensation Insurance Rating Bureau (WCIRB) in its filing.

Jones issued the advisory rate after a public hearing and careful review of the testimony and evidence submitted by stakeholders. The pure premium benchmark rate is only advisory, as the Legislature has not given the insurance commissioner authority over workers' compensation insurers' rates.

The WCIRB's pure premium advisory rate filing established that overall costs continue to decline in California's workers' compensation insurance system.

The pure premium advisory rate reduction is based on insurers' cost data through December 31,2017. Insurers' net costs in the workers' compensation system continue to decline as a result of SB 863, SB 1160, and AB 1244 enacted by the Legislature and Governor Brown. The WCIRB noted continued favorable medical loss development including acceleration in claim settlements.