Rate Determination

Workers’ Compensation rates are set competitively by each insurer. However, a rating and actuarial organization, Workers’ Compensation Insurance Rating Bureau (WCIRB), acts as a data gathering and rating organization, developing data for each of about 700 types of businesses, and publishes Loss Cost rates on behalf of the California Department of Insurance. These Loss Costs take into consideration past claims experience, current trends and future projections. They are then presented to the Insurance Commissioner, who holds a hearing, usually in October, and then either approves their use or requires some adjustment upward or downward, based upon his own estimates, effective each January 1. The newly approved Loss Costs are then used as the basis for each insurance company to set its own rates, taking into consideration expenses for claims administration, loss control and administrative expenses, as well as profit.