California’s annual workers’ compensation rate is set to fall by 2.1% following an order from Insurance Commissioner Ricardo Lara.

The decision overturns a 0.9% rate increase request from the California Workers’ Compensation Insurance Assessment Bureau (WCIRB), according to a report by AM Best.

The new order lowers the average net advisory premium rate from $1.41 per $100 of payroll in 2023 to $1.38, effective Sept. 1. The increase recommended by the U.S. Workers’ Compensation Commission would have set the net premium rate at $1.42 per $100 of payroll.

Several factors contributed to the decision to lower the standard, with a lower number of medical services required per claim and a lower proportion of claims involving permanent disability being named for significant reasons, according to a statement from the commissioner’s office.

Other considerations included the strong state of California’s workers’ compensation industry, general economic conditions, and insurance industry forecasts.

Read more: Commissioner Lara Orders Non-Renewals, Cancellations for Thompson Fire-Affected Areas

A similar adjustment was recently made in Massachusetts, where Acting Insurance Commissioner Kevin Beagan ordered a 14.6% cut in statewide workers’ compensation rates, compared to an 8.3% cut recommended by the state’s Workers’ Compensation Rate Advisory Board.

The California order also emphasizes that the commissioner’s action is a recommendation, and that insurers will ultimately set their own rates. Individual premiums can vary widely based on a company’s industry risk profile, employee mix, operations, and claims history.

In 2023, the average effective workers’ compensation rate was $1.60 per $100 of payroll, down from $1.68 in 2022 and $1.81 in 2021, according to the commissioner’s order. The average effective rate was 9.6% higher than the recommended net premium rate of $1.46 and about 36% lower than the industry average manual insurance rate of $2.52 as of January 1, 2024.

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