Lower workers compensation rates in California will bring down written premium once again this year, according to a forecast from the Workers Compensation Insurance Rating Bureau.

That revelation is expected in a full report on the state of California’s workers comp system due out in about a week, but David Bellusci, WCIRB executive vice president and chief actuary, gave a rundown of what to expect during the group’s annual conference in San Francisco on Thursday.

This year’s conference, attended by carriers, brokers, state officials and other workers comp stakeholders, brought in record attendance, according to Bill Mudge, president and chief executive officer of the WCIRB.

“We have 92 percent of the state’s workers comp market share represented in this room,” he told the audience.

Mudge opened the conference and talked about the WCIRB’s strategic road map and changes it will bring, including using data to better access how people interact with the state’s massive workers comp system.

“You’re going to see us start to move out in new ways in this field called data science,” he said.

The state of workers comp rundown, which included Tony Milano, an actuary and WCIRB vice president, shows written premium dropped in 2017 to $17.7 billion from $18.1 billion a year earlier after seven years of increase.

The report forecasts $17.4 billion in written premium this year.

“We expect probably a similar drop in 2018,” Bellusci said.

He said that workers comp writers nationwide should take note of what’s going on in California, because the state makes up 20 percent of the total U.S. workers comp premium.

Workers comp rates nationwide have been on the decline, and that’s no different in California, despite the state’s higher-than-national median rates. Data from the National Association of Insurance Commissioners released earlier this month shows that the average premium rate charged to employers fell 10 percent.

“What we’ve seen is rates are continuing to drop,” Bellusci said.

Rates in 2017 were $2.46 per $100 of payroll, while the advisory pure premium has dropped to $1.74 for this year from $2.75 in 2015, according to Bellusci.

California Insurance Commissioner Dave Jones in late May adopted a revised workers compensation insurance advisory pure premium rate by lowering the benchmark to $1.74 per $100 of payroll for workers comp.

The change is effective July 1.

Keynote speaker Dr. John Howard, director of the National Institute for Occupational Safety and Health, discussed transformative technologies in a presentation titled “The Future of Work.” He prefaced his talk, in which he hit on aspects of the new economy, with a lesson on industrial revolutions.

Society is currently in the Third Industrial Revolution, an electronics-based era of transformation. There’s another revolution coming our way, one that promises a fusion of technologies and people. “Now we’re going into a Fourth Industrial Revolution,” he said.

Occupational robotics may figure heavily into that revolution.

The U.S., despite its size and status, is behind other nations in the use of occupational robotics. South Korea leads the way with 478 robot workers per 10,000, while the U.S. trails countries like Japan and Germany with less than 200 per 10,000 workers, he noted.

Major General Garrett Yee, the U.S. Army lead for Network Modernization, Military Deputy, Cybersecurity Directorate, gave a talk about cybersecurity.

Yee, who spends a lot of time at the Pentagon, said the facility has banned mobile devices and tracking devices like Fitbits and had to provide a place for people to take them off and store them when they arrive at the building.

“You go in there and you see these rows of lockers,” he said.

Yee offered numerous cyber recommendations, imploring those present to ask their IT departments questions like:

  • How good are we on authentication? Yee suggests all companies adopt two-factor authentication as a standard.
  • How is our website DMZ (demilitarized zone)? He suggested that public sites be separated from internal IT systems.
  • How good is our endpoint security? Yee said the U.S. Army recently upgraded one million pieces of computer equipment, making it a priority because of concerns over security.

Earthquakes and workers comp was another topic at the event.

Chris Folkman, senior director of product management for Risk Management Solutions Inc., and Ward Brooks, vice president of research for the WCIRB, talked about a recent report the two organizations combined to update.

The insights out of that report “will have public policy implications,” Folkman said.

The authors of the report modeled loss scenarios for a California earthquake and how that would affect the workers comp system.

A 1-in-100-year event could produce $300 million in losses, while a 1-in-250-year event could produce losses of $1.4 billion.

If the 1906 San Francisco Earthquake were to happen today during peak working hours (11 a.m. PST), 4.7 million workers would be subject to ground shaking with an estimated $3.7 billion loss. Permanent partial disability is expected to make up the lion’s share of the loss with $1.28 billion, while $965 million in losses would be from fatalities.

Folkman said that while these losses are hypothetical, the chances that a big earthquake strikes the state are not.

“Some large event probably will happen in the Bay Area in the next 30 years according to our models,” he said.

The implications of the California Supreme Court’s Dynamex v. Lee decision were discussed by Mark Webb, owner of Prop 23 Advisors, and Saul Allweiss, a partner in the law offices of Allweiss and McMurty.

“What happened was really earth shaking,” Allweiss said.

The decision has the potential of transforming millions of independent contractors into full-time employees by adopting a new test for classifying workers beginning with the assumption that workers are employees and that companies need to prove that a given worker is actually an independent contractor.

Companies that wish to classify workers as independent contractors must show:

  • The company does not direct the workers in the performance of their jobs.
  • The work performed is outside the scope of the company’s typical business.
  • Workers have made the decision to go into business for themselves.

An employer must prove all three to have workers classified as independent contractors.

Webb said the decision doesn’t immediately change workers comp, but that doesn’t mean it won’t happen.

“At this point it’s not an imminent threat, but it is something worth keeping an eye on,” Webb said.

A “Fraud Busters” panel was moderated by Don Marshall, vice president and national director at Zenith Insurance Co., who is also chair of the California State Fraud Commission.

Panelists were Mi Kim, chief with the Department of Industrial Relations’ anti-fraud unit; Shaddi Kamiabipour, a senior deputy district attorney for Orange County; Joel Sherman, vice president of safety and corporate affairs for Grimmway Farms and a member of the State Fraud Commission; and Jay S. Gleeman, a legal specialist in workers comp law with Cohen and Associates.

The system is big, and opportunists—from claimants to businesses to providers—will find a way to get money out of it, panelists agreed.

“Any system that has a pool of money is open for ripping off,” Marshall said.

Sherman said the purpose of workers comp is so money flows out to claimants.

“The system is designed, in all respects, to pay claims,” he said.

While a lot of claimants get a lot of media attention for workers comp fraud, some of the most sophisticated perpetrators are providers, said Kamiabipour.

“When we executed warrants on these people, we found that it is truly organized crime,” she said. “It is white-collar, organized crime.”

She added that these fraudsters prefer that businesses and insurers view paying out on claims or liens as a better option than fighting back in court.

“They make it cheaper for you to pay than fight it,” she said. “That’s their model.”