Forget Y2K. Forget millennial doomsday warnings. Get ready for workers’ comp sticker shock.
California Insurance Commissioner Chuck Quackenbush recently issued a “rate increase advisory” warning businesses that workers’ compensation costs are likely to soar as much as 18.4 percent in the coming months.
The announcement confirms the dreaded recommendation of the nonpartisan Workers Compensation Insurance Rating Bureau. Earlier this year the bureau asked the state Department of Insurance for the hike in the premium advisory rate, the state benchmark used by insurance firms for setting their own rates.
If the advisory rate hike is fully implemented , as it is expected to be , the increase would cost California businesses as much as $1.3 billion in additional workers’ comp premiums.
The bureau said the increase was necessary because insurers’ costs have escalated $1 billion a year since 1995, chewing up their profits. However, most of those cost increases were due to overhead costs like commissions, brokerage fees, claims administration and general office expenses.
Fortunately legislation passed by both state houses that would have raised workers’ comp rates an additional 27 percent was vetoed by the governor. But the stage is set for another version of this trial attorney-backed bill to be pushed through the Legislature next year.
All this rate hike talk is occurring at a time when the Western Insurance Information Service reports that workplace injuries in California have declined to an all-time low.
California Chamber of Commerce President Allan Zaremberg warned that Quakenbush’s rate advisory and the probability of new legislation next year would be a “double hit” on employers that “cannot be absorbed without consequence to employers, workers and the economy.”
Lawmakers in Sacramento need to be reminded that skyrocketing workers’ comp rates was one of the factors leading to the exodus of businesses from California earlier this decade. Let’s not open the floodgates again by making the same mistakes we did before.