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Overview of 2016 WCIRB Report on California Workers’ Compensation

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Posted By DAM Firm | February 24 2017 | English

In fall 2016, the state’s Workers’ Compensation Insurance Rating Bureau (WCIRB) released a report on insurer experiences. The report contains information from nearly all workers’ compensation insurers in the state of California. The report reveals trends and insights employers can use to make informed decisions about insurance coverage and claims.

Key Findings in the September 30, 2016 Report

The findings show general trends in claim costs and insurer losses, including:

  • The written premium from January to September in 2016, $14.1 billion, was 5% above the amount for the same period in 2015.
  • The average charged rate employers paid per $100 of payroll from July through September was $2.65. This number represents a 7% decrease in the amount employers paid during the first six months of the year and a 13% decrease from the first six months of 2015.
  • The Bureau estimates an ultimate accident year loss and ALAE (allocated loss adjustment expenses) ratio of 72.5% in 2015. The ratios held steady in recent years and represent a gradual decrease in loss and expense costs since 2009. Research attributes the trend to increased premium rates and a moderated growth in claim severity.
  • Predictions for the ultimate accident year combined loss and expense ratio is 97% for the 2015 year. Around 57% of the ratio results from indemnity and medical loss ratios and 40% results from loss adjustment and other ratio calculations. The total losses and expenses represent a gradual decline and some of the lowest ratios since 2007.
  • Indemnity claim frequency in 2015-2016 was slightly lower than in 2014-2015 but represents an overall increase over previous years. The WCIRB connects increases in claim frequency with rising cumulative injury claims, late reported claims, and claims involving several injuries.
  • The WCIRB estimates the average cost of an indemnity claim at $81,000 in 2015, which represents an increase of 3% from 2014 and an increase of 6% from 2013.
  • Actual insurance losses reported by insurers in 2015 appear $1.7 billion lower than losses reported by insurers.

The data includes limited information from the 2016 year, but it does include detailed insurer reported information from the 2015 year. Together, the set suggests employers are paying less per $100 of payroll for coverage than they did in early 2015 but more than in 2009. Insurers are experiencing fewer total losses compared to the previous year. Claim frequencies are falling, but the cost per claim represents an increase. If the trends remain, insurers and employers can expect the 2017 accident year to include familiar rates of costs and expenses. In fact, the actual reported losses may support the continual decline in premium costs and the decrease in claim frequencies.

About the WCIRB’s Report

The WCIRB conducts research and rates experiences to help everyone involved in the system (insurers and employers) discover cost-effective insurance solutions. The September report features actuarial projections and actual reporting information. As an overview of statewide insurer experiences, individual insurers may provide their clients with differing agency information. Underwriting practices, claims processing, and other insurance factors may change the actual experience of individual insurers.

Historically, California has maintained a reputation for a complex and costly workers’ compensation program. Employers can use the information in the report to keep track of average premium expenses and claim frequency rates compared to statewide trends. Legislative changes, medical cost changes, geographic location, and other factors play a role in the total workers’ compensation losses and expenses from quarter to quarter.

The WCIRB gives every participating employer an experience modification rating based on the individual company workers’ compensation data. Insurers use the information to establish premiums. Take the most recent insurer experience reports and experience modification ratings into account to establish workplace safety policies. Companies that use proactive accident minimization and accurate reporting standards can improve worker health while minimizing premium costs.

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