Skyrocketing California Workers' Compensation Costs Reason for ...

Last month, the Workers? Compensation Insurance Rating Bureau (WCIRB) published their annual Insurer Experience Report. The report is a review and analysis of 2011 experience submitted by California workers? compensation insurers, representing almost 100% of the statewide market.

The report shows that all California workers? compensation insurers combined paid out a total of $8.4 billion in 2011, the highest recorded losses in 7 years. On the flip side, the California insurance industry only netted $7.9 billion in billed premiums (after deductible credits), ending in the red to the tune of $500 million for the year.

However, some of the most troubling 2011 insurance data comes from the California Workers? Compensation Institute (CRCI) April bulletin. The publication, which provides insights into the California workers? compensation market, reviews the cost of workers? comp indemnity claims. In it, they report indemnity insurance claims in 2011 reached a record high average of almost $67,000 PER CLAIM. Rising medical costs and claim severity account for these increased costs.

What is an Indemnity claim?

Generally speaking, indemnity claims relate to payments for lost wages, loss of earning potential, or a permanent disability due to an injury sustained on the job. However, there are three main types of indemnity claims:

An employee generally qualifies for temporary indemnity after missing more than seven days of work due to a work-related injury that leads to a disability.

If an employee is slightly injured but still able to work in a modified capacity, then they may qualify for workers? compensation payments, in addition to the income they are able to earn, based on a percentage equal to their average pre-injury wage.

• Injured and Unable to Work

Often, if injured employees are unable to return to work, they receive a lower indemnity benefit while on partial or temporary disability. For example, they may receive 2/3 of their average pre-injury weekly income.

The cost of most of these claims can be mitigated by a proactive effort by your risk management department. Ultimately, a positive attitude and educated workforce can help keep your workers? compensation rates at bay. These risk management efforts will be discussed in future posts.

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