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Understanding the Importance of Advisory Pure Premium Rates

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Understanding the Importance of Advisory Pure Premium Rates

August 24, 2016

Last year, the California Insurance Commissioner approved a change to the California Workers’ Compensation Experience Rating Plan–1995 (ERP) to use expected loss rates rather than advisory pure premium rates as the basis of experience rating eligibility. (See 2016 Experience Rating Changes and Determining Eligibility.) Though no longer a primary factor in determining if an employer is eligible for an experience modification, advisory pure premium rates still play an important role in workers’ compensation insurance in California. The advisory pure premium rates approved by the Insurance Commissioner act as a benchmark that insurers can use to establish their own premium rates. Here are some questions that employers might have about the rates they pay.

Are advisory pure premium rates the same as insurer premium rates?

Advisory pure premium rates are based upon loss and payroll data submitted to the WCIRB by all insurance companies. They are developed by the WCIRB and submitted to the Insurance Commissioner for approval. Based on the WCIRB’s recommendation as well as other input gathered during the public hearing process, the Insurance Commissioner will adopt a set of advisory pure premium rates by classification at least once a year. Insurers may develop their own rates by adopting the approved advisory pure premium rates as a starting point and adding on costs to account for factors such as commissions and taxes not reflected in advisory pure premium rates (as illustrated in the table below), or they may develop their own rate structure, using their own statistical and actuarial methods. In any case, insurers must file their rates and rating plans with the Insurance Commissioner at least 30 days prior to their effective date.

   Pure Premium Rates vs. Insurer Rates

Pure Premium Rates
Insurer Rates
Claims/Losses Claims/Losses
Loss Adjustment Expenses Loss Adjustment Expenses
  Acquisitions Expenses
  General Expenses

How do advisory pure premium rates and insurer rates relate to classification?

An employer’s business is assigned to an industry classification. The WCIRB develops and the Insurance Commissioner approves an advisory pure premium rate for each industry classification for use in California based on the payroll and loss experience of employers assigned to that classification. Each insurer files a premium rate for each classification with the Insurance Commissioner. The premium that an employer pays for their workers' compensation insurance policy begins with multiplying the insurer's premium rate for the employer’s assigned classification(s) by the payroll generated by their employees. Workers' compensation rates are applied per $100 of payroll, so a rate of $5.86 means that for every $100 of payroll, $5.86 in premium is generated.

Approved advisory pure premium rates for each classification are viewable in the Classification Search tool on Search for a classification and a table of the three most recently approved advisory pure premium rates is displayed along with the classification’s phraseology and other related information:

When are advisory pure premium rates amended?

Advisory pure premium rates are amended at least once a year. Last week, the WCIRB submitted a Pure Premium Rate Filing to the Insurance Commissioner proposing a decrease in advisory pure premium rates effective January 1, 2017. This marked the fourth consecutive filing that the WCIRB has recommended a decrease in advisory pure premium rates, totaling -18.6% when compared to the average of the approved January 1, 2015 advisory pure premium rates.

Where can I find a complete list of approved pure premium rates?

The five most recent approved pure premium rates are available in excel and text formats in the Publications and Filings section of They are listed by classification code and expressed as a rate per $100 of payroll.

Where can I find insurer rates?

The California Department of Insurance website has a Workers’ Compensation Rate Comparison section that includes lists of insurer rates by classification code. To learn more and to view the lists, go to

How can I find out if new advisory pure premium rates have been published?

You can visit for the latest news on the WCIRB’s pure premium rate filing, and subscribe to WCIRB Wire Email Alerts, or follow the WCIRB on Twitter and Facebook to be notified when approved pure premium rates have been posted on 

Related Information

Pure Premium Rate Filings

Online Guide to Workers' Compensation: The Rates You Pay

Classification Search 

Further Editions

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