What makes the Workers’ Compensation Insurance System in California unique?
California is currently the most expensive state in the country for employers workers compensation coverage. Rates throughout the state have continued to rise over the past 10 years. Much of the increased costs are caused by the rising costs of medical coverage and state laws.
State law, like in most states, requires all employers to provide workers compensation coverage to all employees of a particular company. Failure to purchase workers comp coverage is a criminal offense in California. Employers may receive a fine of $10,000 or more and up to a year in a county jail. It is also illegal for any employer to pay a medical bill directly to the provider. A claim form (DWC Form 1) must be filed with the insurance company for any injury requiring more than first aid care.
As you may know, California has the largest economy of any state in the United States. This brings an extraordinary amount of businesses to the state who have an extraordinary need for commercial insurance. Because the states mandates that employers carry workers comp coverage there is a lot of competition to quote the coverage of those businesses. In most cases this increased competition would bring the cost of the coverage down, but not in the case of workers compensation insurance. The main factors driving prices up in the state of California are the state regulations that many would say favor the worker over employers.
According to the Insurance Journal there are steps being taken to curb the increase in workers compensation costs throughout the state of California:
“Claim frequency, claim administration and high medical costs are typically among the drivers of high workers’ comp rates. However, the state in 2012 passed a massive workers’ comp reform law, which according to its supporters seems to be working.
California’s Workers’ Compensation Rating Bureau earlier this month submitted a pure premium rate filing to the California Department of Insurance proposing Jan. 1, 2017 advisory pure premium rates lower than the corresponding industry average.
The WCIRB submitted a rate filing that averaged $2.22 per $100 of payroll, citing in part legislative changes made this year that the bureau believes could help reduce costs. Senate Bill 1160 and Assembly Bill 1244 are both designed to remove medical providers convicted of fraud from the system and prevent them from filing liens.”
Additionally, a lot of business owners in California assume workers compensation is similar regardless of the carrier. Depending upon the industry you are in and the scope of the work you do within that industry, coverages can vary dramatically. The cost of coverage for the same classification codes can vary significantly between carriers. This is because the appetites for certain industries and types of coverage change from year to year and carrier to carrier. For example, after Hurricane Katrina many insurance carriers were very conservative when offering homeowners or hurricane insurance throughout the coastal areas in the southeast. This was because of the damaging amount of claims the carriers had to pay out as a result of this damaging storm.
At some independent insurance agencies, they take the work out of finding an insurance company with quality coverage and affordable rates. They do this by being able to quote you coverage from several carriers as opposed to just one or a select few. In short, they shop the insurance so you don’t have to. Partnering with a good independent insurance agent with whom you trust and speaking candidly with them about your business can go a long way towards saving on workers compensation insurance in California.