By Julius Young
Boxer & Gerson

If insurers were expecting some love from Insurance Commissioner Poizner, they got a bunch of dead roses instead.

Twice in 2009 Poizner swatted down insurer requests for hefty increases in the advisory workers' comp rate, known as the "pure premium rate".

But like the characters in Night of the Living Dead, the Workers' Compensation Insurance Rating Bureau came back in front of Poizner in October, arguing for a 27.7% rate increase.

Could it be time for some personnel changes at the WCIRB? One might think so. Trotting out a 27.7% increase and trying to sell it with a tepid performance at the rate hearing wasn't exactly the WCIRB's finest moment.

And shortly thereafter the WCIRB's position was undercut as SCIF's rate increase was announced at a much, much lower level.....5.2%.

So the WCIRB gets the dead roses again, and the Commish leaves office speaking up for beleaguered California employers.

Here is part of a statement released by Poizner:

"Following a hearing on workers' compensation rates in June 2009, Commissioner Poizner released a report detailing 27 available but underused efficiencies (attached below) insurers should use to control costs. Commissioner Poizner has consistently instructed insurers that until they demonstrate that they are implementing these changes, he would not consider a rate increase."

"Since 2008, the actual premium paid by California employers increased by a modest 3%. During that same period, insurer filings with CDI claimed a 36% average increase in claims costs. Widespread discounting based on employer experience and other market factors has negated that increase, stabilizing employer costs. Poizner characterized this development as positive and as an indication that California's competitive market is keeping workers' compensation rates under control."

"Commissioner Poizner also announced his decision to implement three reforms that will significantly improve and inject transparency into the review process. The reforms require the WCIRB to:

• Calculate future advisory pure premiums based on insurers' actual filed rates rather than on theoretical previous Benchmark numbers. Commissioner Poizner noted that under this approach, the current filling would actually have sought a rate decrease.
• In addition to industry average numbers, include in each future rate filing a table showing the proposed change for each individual worker classification, allowing employers to better understand the specific impact the filing could have on them;
• Use Department filing information and data from the WCIRB to evaluate overall workers' compensation insurer profitability. This will enhance regulators' ability to monitor the health of the workers' compensation system and make it easier for consumers to understand insurance pricing."

"The workers' compensation rate-making system is long overdue for some much-needed reforms," Commissioner Poizner said. "The benchmark rate is only theoretical, and this has enabled insurers to file for and pass on rate increases to businesses. I will not allow this broken rate-making process to serve as cover for the insurance industry in its justification for higher rates that are simply not justified."

Over the coming few years the industry is likely to see itself under even more scrutiny by incoming Insurance Commissioner Dave Jones.

If the industry believes rates need to rise, carriers will have to live with their own pricing decisions.

What we've seen over the last few years is that employers have the upper hand. Carriers cannot expect an insurance commissioner to hand the insurance industry a gift of political cover for rate increases.

Poizner has now pointed the way to a new day in looking at premium rates: looking at overall carrier profitability and looking at actual rates charged.

Stay tuned.