Ask the Ombudsman

The WCIRB has no jurisdiction over claims handling issues. The Insurance Commissioner’s regulations, contained in the California Workers’ Compensation Experience Rating Plan—1995 (ERP) and the California Workers’ Compensation Uniform Statistical Reporting Plan—1995 (USRP), require the WCIRB to use the payroll and loss data reported by the insurance company to calculate the experience modification. The WCIRB can answer questions about how reported losses were used in the experience modification. However, the WCIRB cannot amend or delete data unless a revised report amending the payroll or loss information is filed by the insurance company. Nor can the WCIRB reduce or rescind an experience modification in the absence of a revised report.

If you have questions about the value, status or legitimacy of a claim, your insurance company can answer these questions and provide you with information about how claims were administered. An officer in the Information and Assistance Unit of the Division of Workers’ Compensation (DWC) at the Department of Industrial Relations is available to help you with general questions regarding claim handling. Here’s where you can find the DWC office location near you.

The WCIRB does not have the authority to make a determination regarding who is covered on your workers’ compensation policy. The California Labor Code (Sections 3351 and 3352) governs the exclusion of eligible business owners from workers’ compensation coverage. Under certain conditions, these owners may elect to be excluded from coverage. The following individuals are eligible for exclusion:

• Officers and members of boards of directors of certain types of corporations
• Owners of professional corporations
• General partners
• Managing members of limited liability companies

These individuals may elect to exclude themselves from coverage if they meet the requirements for exclusion. However, many policyholders are surprised to discover at the time of the audit that the insurance company did not receive an election to exclude the eligible business owners from coverage. Consequently, their exposure has been included in the insured’s premium computation.

Eligible business owners are required to elect to be excluded from workers’ compensation coverage. The exclusion waiver must be submitted every year; it is not automatically renewed. The election to exclude these individuals is initially indicated on the application for the policy. The election form or letter should be submitted to the insurance company prior to the effective date of the policy, but the election must be made no later than 15 days after the policy's inception date. It is not permissible to exclude owners from the policy retroactively. The policyholder and the agent should verify that the form or letter has been received by the insurance company and that the exclusion endorsement has been attached to the policy every year prior to renewal.

A sole proprietorship with no employees is typically not required to purchase workers' compensation insurance. However, all active C-39 (Roofing) licensees are required to carry workers’ compensation insurance or a valid Certification of Self-Insurance, whether or not they have employees. Effective January 1, 2023, you are also required to carry workers’ compensation coverage if you hold a C-8 (Concrete) classification, a C-20 (Warm-Air Heating, Ventilating and Air-Conditioning) classification, a C-22 (Asbestos Abatement) classification and/or a C-61/D-49 (Tree Service) classification.

Policyholders often ask, "Why is the rate shown on the WCIRB website lower than the rate that I’m being charged by my insurance company?"

The rates that you see on the WCIRB website are advisory pure premium rates, which are significantly lower than the rates charged by insurance companies. Advisory pure premium rates reflect the claim costs (medical and indemnity) and the loss adjustment expenses, which include, but are not limited to, fees for the cost of legal services, salary, legal services for subrogation recoveries, court costs and medical cost containment programs. Insurance company rates also include the company’s cost of doing business, which varies from year to year.

Each insurance company develops its own set of workers' compensation insurance rates. These rates are used in determining what you actually pay for your workers' compensation insurance coverage (insurance company rates) and are filed with the California Department of Insurance (CDI) prior to use. An insurance company may use the WCIRB's advisory pure premium rates as a starting point to derive its own rates and add on factors to account for its administrative costs, or an insurance company may develop its rates by using its own statistical and actuarial forecasting methods. Once an insurance company's rates have been filed with the CDI, they must be used on the insurance company's policies in effect during the applicable period.

You can contact your insurance company for assistance with specific questions about the rate applied to your workers’ compensation insurance policy. The Workers' Compensation Rate Comparison page on the CDI website lists the rates filed with the CDI by every insurance company for each industry classification from lowest to highest. Important note: Be aware that some insurance companies may have eligibility requirements – such as a minimum premium size, years in business or preferred classifications – which may prevent them from providing quotes to all employers. Therefore, not all insurance companies listed in this rate comparison will provide quotes to all employers.

After buying or selling a business, many policyholders are surprised to learn they have acquired the prior owner’s payroll and loss history or that they will retain the payroll and loss experience for a business that they no longer own.

If you sell a business:

A company's payroll and loss experience stays with the owner throughout the applicable experience period, regardless of whether or not the company changes its employees or operations. An owner cannot dispose of their company’s payroll and loss experience by selling the business and starting a new one, nor can they discard their experience by selling a portion of the business.

If you buy a business:

It is important to be aware that if you acquire a business or a portion of a business, it is quite possible that the seller's payroll and loss experience will be carried forward for use in the experience rating of your business. The California Workers' Compensation Experience Rating Plan—1995 (ERP) has been structured to ensure that when a business undergoes a material change in ownership, the payroll and loss experience of the prior owner shall be carried forward to the new owner unless there is a compelling reason to do otherwise, which is limited to material (majority) changes in employees or operations.

The rules regarding the application of a risk's payroll and loss experience to the buyer are based on the following rationale:

• Loss experience reflects ownership, employees and operations
• The predictive value of past loss experience is diminished when there is a majority change in both ownership and employees

In order for the WCIRB to make this determination, your agent or insurer needs to use the online Ownership Information Submission Tool to submit the details of the ownership transaction in WCIRB Connect^®. An Ownership Analyst in the WCIRB Member Services Department will review the information and perform an analysis to determine whether the seller’s experience history is applicable to the buyer for experience rating purposes. After the Ownership Analyst has completed their review, they will issue a letter to notify the insured and their insurance company of the determination regarding the applicability of the seller’s payroll and loss experience.

Employers are not required to provide workers' compensation coverage for independent contractors; however, a 1099 Form, which documents payments made to a non-employee during a tax year, does not necessarily confer status as an independent contractor. In the event of a workplace injury, the insurer may be required to provide workers' compensation benefits to an independent contractor who does not have their own workers’ compensation coverage. Many auditors place independent contractors on a workers’ compensation policy at audit.

Assembly Bill 5 (AB5) was signed into law effective January 1, 2020. Under this law, the presumption is that a worker is an employee. The burden is on the employer to demonstrate the independent contractor status of the worker by satisfying three conditions that include:

• The worker is free from the control and direction of the hirer.
• The worker performs work outside the usual course of the hiring entity’s business.
• The worker is customarily engaged in an independent trade or occupation providing similar services.

To successfully show a worker is an independent contractor, an employer must demonstrate (via documentation) that the worker satisfies all three criteria.

Employers cannot submit a request for an inspection to the WCIRB. Employers who would like to have the WCIRB perform an inspection of their business must pursue the request through their insurer, agent or broker of record. Agents and brokers of record may request a Special Inspection for a $200 fee if they need assistance in determining the classifications that best describe the employer’s operations.

Some employers ask why their policies with the more favorable loss information are not prioritized for use in the experience modification (X-Mod). Some even ask if they can choose the policies that were used to determine their X-Mod.

The data used to calculate your X-Mod is determined by your company's rating effective date, which is determined by the effective date of your policy. The rating effective date determines the experience period and the effective date of the X-Mod. All payroll and losses developed under policies incepting within the experience period are used in the calculation of the X-Mod. The experience period is a three-year window beginning four years and nine months prior to the rating effective date and ending one year and nine months prior to the rating effective date. For example, if the rating effective date is July 15, 2025, the experience period is October 15, 2020 to October 15, 2023.

• Section III, Eligibility and Experience Period, Rule 2, Experience Period, of the California Workers’ Compensation Experience Rating Plan—1995

Audited policy data reported by the insurer must be used for experience rating. The audited payroll and loss information for policies written in California is reported to the WCIRB on Unit Statistical Reports (USRs).

Claims are to be valued for the first time at 18 months after the month of the inception date of the policy. Any claims that are open at the time of a valuation must be valued again 12 months thereafter, up to 10 valuations. Claims pertaining to policies incepting in May would be valued in November.

USRs reporting audited payroll and loss data are due to be filed with the WCIRB within two months of the date of valuation. The first USR is due no later than 20 months after the month of the inception date of the policy. Any claims reported as open on a USR must be reported again (indicating the most recent valuation) 12 months thereafter, up to 10 reports. Claims valued in November would be reported in January.

The experience period determines the payroll and claims that are used in the calculation of the experience modification (X-Mod). It is a three-year window beginning four years and nine months prior to the rating effective date and ending one year and nine months prior to the rating effective date. All payroll and claims for policies incepting within the experience period have been subject to an audit by the time they are reported to the WCIRB.

For example, if the rating effective date is May 22, 2025, the experience period is August 22, 2020 to August 22, 2023. This could include the following policies:

The policy effective May 22, 2024 does not incept within the experience period for the May 22, 2025 X-Mod. Also, X-Mods are calculated and published when the required data has been received by the WCIRB. The reported payroll and loss data for the 2024 policy are not due to be valued until November 2025 and are not due to be reported to the WCIRB until January 2026; therefore, the 2024 policy cannot be used in the X-Mod calculation.

• Section III, Eligibility and Experience Period, Rule 2, Experience Period, of the California Workers’ Compensation Experience Rating Plan—1995 (ERP)

• Section III, Eligibility and Experience Period, Rule 3, Experience to be Used for Rating California Workers’ Compensation Insurance Risks, Subrule g, Unaudited Payroll, of the ERP

• Part 4, Unit Statistical Reporting Requirements, Section I, General Instructions, Rule 2, Date of Valuation, of the California Workers’ Compensation Uniform Statistical Reporting Plan—1995 (USRP)

• Part 4, Unit Statistical Reporting Requirements, Section I, General Instructions, Rule 3, Date of Reporting, of the USRP