In a November 29, 2023 memo, the California Department of Industrial Relations (DIR) notified insurers that administer workers’ compensation (WC) insurance in the state that the 2023-2024 fiscal year will include billions of dollars in new assessments.

Labor Code Sections 62.5 and 62.6 require the DIR to levy the total amounts of various WC assessments between insured employers and self-insured employers in proportion to payroll paid in the most recent year for which information is available. According to the DIR, the assessments are aimed at providing a more stable funding source to support operations of the courts, ensure safer on-the-job working conditions for employees and enforce WC labor standards and requirements.

All employers with WC insurance policies issued during the 2024 calendar year will be subject to an assessment in order to recover amounts advanced on behalf of policyholders. The assessable premium is the amount charged after rating adjustments have been made — with the exception of adjustments resulting from the application of deductible plans, retrospective rating or the return of policyholder dividends — and will be applied to the estimated annual assessable premium for 2024.

Leaders from various business sectors note that the increase in assessments will result in higher WC rates — with the very real possibility of 11% or higher increases, particularly for the California restaurant industry. The exact impact on WC rates, however, depends on various factors such as how the assessments are distributed among employers and how insurers elect to adjust their rates in response to these changes.

Experts believe that increases in WC insurance rates will result in a high number of California employers shopping around for better rates. Brokers should be prepared to address the new regulatory trend in advance with their policyholders by way of comprehensive risk management consultations and to help employers reassess their insurance options and on-the-job safety training and potential cost-saving efforts.

Kristi W. Dean, Managing Partner

Stone Dean LLP

Kristi is an experienced litigator and transaction attorney who represents clients in business transactions and litigation disputes. Her litigation practice focuses on trade secrets, unfair business competition, insurance law and complex business disputes, with a focus on insurance-related issues. Kristi can be reached at 818-999-2232 or kdean@stonedeanlaw.com.

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