Worker's Compensation Insurance

16 How IsWorkers’ Compensation Premium Calculated? Classification Workers’ compensation premium calculations are based on how employees are classified according to their specific work duties and the rate assigned to each corresponding employee classification. Classifications that group distinct and identifiable occupations, industries, or business are developed and assigned codes by theWorkers’ Compensation Insurance Rating Bureau of California (WCIRB) and are approved by the Insurance Commissioner. Workers’ compensation insurers generally use these classification codes when writing workers’ compensation policies. Insurance companies are allowed to develop and submit their own classification system to the CDI for approval, but this is uncommon due to the strict standards required to file a separate workers’ compensation classification system. The WCIRB provides a policyholder ombudsman, who is available to answer questions from employers on classification, experience modification, and rating issues. Please see the “Resources” section at the end of this brochure for contact information regarding the WCIRB and the policyholder ombudsman. Open Rating Workers’ compensation insurers assign a specific rate to each industry classification code. These rates must be filed with the CDI. Currently, California workers’ compensation insurers operate under an “open” rating system. This means that individual companies set rates based on their ability to adequately cover losses and expenses in each industry classification. Open rating requires that all workers’ compensation insurers file their rates and all applicable supplementary rate information with the CDI. Rate approval is based on many factors. One of the most important factors for rate approval is rate adequacy.