Current Issue in California Workers Compensation Guy A. Avagliano, - PowerPoint PPT Presentation

Current Issue in California Workers Compensation Guy A. Avagliano, FCAS, MAAA September 15, 2011 1

Outline  A Brief History  Loss Ratios  Rates  Frequency  Severity  Loss Development  Outlook 2

A Brief History Source: WCIRB 3

A Brief History  1989-91: High Loss Ratios Minimum Rate Law – Rampant Fraud – Medical Mills – Stress Claims – Post Termination Claims – 4

A Brief History  1989-91: High Loss Ratios  1992-94: Low Loss Ratios Effective Anti-Fraud Measures – Health Insurers Enter Market – Low Medical Inflation – High Profitability – 5

A Brief History  1989-91: High Loss Ratios  1992-94: Low Loss Ratios  1995-99: Very High Loss Ratios Benefit Increases (AB 749) – Open Rating – Deep Discounts in Pricing – Inadequate Pure Premiums – Inexpensive Reinsurance – High Severity Trends, Especially for Medical – Minniear – 6

A Brief History  1989-91: High Loss Ratios  1992-94: Low Loss Ratios  1995-99: Very High Loss Ratios  2000-03: Improving Loss Ratios Rate Increases (Advisory) – Rate Increases (Effective) – Major Legislative Reforms – 7

A Brief History  1989-91: High Loss Ratios  1992-94: Low Loss Ratios  1995-99: Very High Loss Ratios  2000-03: Improving Loss Ratios  2004-05: Very Low Loss Ratios Rate Decreases (But Less Than Indications) – Better Than Anticipated Reform Impact – 8

A Brief History  1989-91: High Loss Ratios  1992-94: Low Loss Ratios  1995-99: Very High Loss Ratios  2000-03: Improving Loss Ratios  2004-05: Very Low Loss Ratios  2006-10: Increasing Loss Ratios Higher Severity – Moderation of Frequency Decreases – Flat or Decreasing Effective Rates – 9

A Brief History Source: WCIRB 10

A Brief History Source: WCIRB 11

Filed Pure Premium Changes Effective Date WCIRB Filed CDI Approved 1/1/08 5.2% 0.0% 1/1/09 16.0% 5.0% 7/1/09 23.7% 0.0% 1/1/10 22.8% 0.0% 7/1/10 no filing n/a 1/1/11 27.7% 0.0% 7/1/11 39.8% (info only) n/a 1/1/12 -1.8% pending 12 Sources: WCIRB, CDI

Market Rates by Policy Year 13 September 15, 2011

Change in Indemnity Frequency 14 Source: WCIRB

Severity (per Indemnity Claim) 15 Source: WCIRB (as of 3/31/11)

Change in On-Level Indemnity Severity 16 Source: WCIRB (as of 6/30/11)

Change in On-Level Medical Severity 17 Source: WCIRB (as of 6/30/11)

Incurred Development (18-30) 18 September 15, 2011

Paid Development (18-30) 19 September 15, 2011

Reported Indemnity Claims (6-18) 20 September 15, 2011

Development: Accident Year 1994 Source: WCIRB 21

Development: Accident Year 1995 Source: WCIRB 22

Development: Accident Year 1996 Source: WCIRB 23

Development: Accident Year 1997 Source: WCIRB 24

Development: Accident Year 1998 Source: WCIRB 25

Development: Accident Year 1999 Source: WCIRB 26

Development: Accident Year 2000 Source: WCIRB 27

Development: Accident Year 2001 Source: WCIRB 28

Development: Accident Year 2002 Source: WCIRB 29

Development: Accident Year 2003 Source: WCIRB 30

Development: Accident Year 2004 Source: WCIRB 31

Development: Accident Year 2005 Source: WCIRB 32

Development: Accident Year 2006 Source: WCIRB 33

Development: Accident Years 2008-10 (Indemnity) 34 September 15, 2011