California WCIRB Actuarial Committee Reviews December 31 Experience

                               San Francisco, CA ( - The WCIRB's Actuarial Committee recently met to review December 31, 2011 statewide insurer premium and loss experience as well as other related information. Actuarial Committee meetings are open to the public and nearly 50 people were in attendance representing insurers, agents and brokers, consultants, the California Department of Insurance, and members of the press. In his opening remarks, WCIRB President and CEO Bill Mudge recognized the breadth of the constituencies represented and thanked the attendees for lending their expertise to the Committee.

Tuesday's meeting was the first Actuarial Committee meeting of 2012 and marked the beginning of the Committee's review of accident year 2011 experience which will ultimately form the basis for any future recommended changes to the average advisory pure premium rate benchmark.

Some of the key findings discussed at the Committee meeting include:

  • After years of decline, the rate at which claims are being settled is stabilizing.
  • The proportion of indemnity claims that involve permanent disability have increased from 44.6% in 2005 to 49.3% in 2010. The proportion does, however, remain below the pre-reform level of 52.9% in 2003.
  • Both indemnity losses and medical losses for accident years 2009 and 2010 continue to show atypically high loss development. The WCIRB's estimated ultimate loss ratio for both accident years is 87%.
  • Accident year 2011 losses are emerging at a level similar to the 2010 level primarily due to relatively small changes in claim frequency and average claim severity; however, with increases in insurer premiums, the estimated ultimate loss ratio has improved to 80.5%.
  • Allocated loss adjustment expenses continue to rise. The average paid allocated loss adjustment expense per indemnity claim for accident year 2010 at September 30, 2011 is 74% above the comparable 2005 level.
  • The large 2010 indemnity claim frequency growth appears to be largely attributable to an increase in the frequency of cumulative injury claims, a decrease in the proportion of reported medical-only claims, and a decrease in the number of claims that are initially reported as indemnity claims but later transition to medical-only claims.

According to WCIRB Chief Actuary Dave Bellusci, “understanding the drivers of this atypical frequency change in 2010 is critical. At this point, it is not clear whether this a one-time anomaly largely attributable to the economic recession, or instead, is indicative of a fundamental shift in the decades-long pattern of declining claim frequency in California.”

The Committee will meet again on April 2 to review additional December 31, 2011 loss information, as well as updated information on loss adjustment expenses and average insurer filed rates as of January 1, 2012.

Documents related to the Actuarial Committee meeting, including agenda, minutes and materials displayed or distributed at the meeting, will be posted to the About the WCIRB section of the WCIRB website when they are available.

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