CALIFORNIA WORKERS COMPENSATION

CALIFORNIA WORKERS COMPENSATIONCALIFORNIA WORKERS COMPENSATION

September 2001

A System Under SiegeA System Under Siege

Presented by:Presented by:

Bill Miller, FCAS, MAAABill Miller, FCAS, MAAATillinghast–Towers PerrinTillinghast–Towers Perrin

(949) 253-5242(949) 253-5242millerw@towers.commillerw@towers.com

CLRS0901.PPT/crf/Irvine 2

Pre-Open Rating Period 1993 to 1994

Heavily Regulated Pricing

No Pricing Deviations

Only Pricing Competition through Dividends

Profitable Results

Strong Reserves

Declining Frequency

Pre-Open Rating Period 1993 to 1994

Insurance Market

Non-Concentrated Market

Strong California Domestic Market

Heavy Capitalization (Premium/Surplus < 1.0)

Healthcare Companies Moving into Market

First Years Of Open Rating 1995 to 1996

Great Pricing Flexibility

Heavy Price Competition

179202

341317

277232

194 197

Jan-73 Jan-78 Jan-83 Jan-88 Jan-93 Jul-93 Jan-94 Oct-94 1995Avg.

1996Avg.

Rate Level Index

Premium Decline

$7.8 $8.4 $8.4 $8.5 $8.9$7.7

1989 1990 1991 1992 1993 1994

Calendar Year

Written Premium

Premium Decline

Continued Declining Frequency

Calendar Year and Accident Year Results Deteriorating

Reserve Deficiencies

Insurance Market

Shifts through Withdrawals/Acquisitions/Expansions

HMO’s Move Out of Market

Still Heavy Capitalization (Premium/Net Worth = .6)

Favorable Investment Returns

Open Rating 1997 to 2000

Continued Heavy Price Competition

100%105%

112%113%

69% 70%66%

63% 62%

1/1/89 1/1/90 1/1/91 1/1/92 1/1/93 1/1/94 10/1/94 1995Avg.

1996Avg.

1997Avg.

1998Avg.

1999Avg.

2000Avg.

California Workers Compensation Rate Level Index

(January 1989 Rate Level = 100%) as of 12/31/2000

Premium Growth with Expanding Economy

Continued Declines in Frequency

-5.7% -5.9%-6.2%

12.0%10.2%

-13.1%

-19.7%

-3.9% -2.1% -0.3%

89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00

Accident Year

As of 12/31/2000

Estimated Percentage Change In Indemnity Claim Frequency

Sharp Severity Increases

$10,000

$20,000

$30,000

$40,000

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Accident Year

As of 12/31/2000

Estimated Ultimate Total Loss Per Indemnity Claim

Inadequate Pure Premium Rates

1995 1996 1997 1998 1999

Policy Year

Estimated InadequacyOf Approved Pure Premium Rates

California Paid Medical Loss Development Factors

Source: WCIRB of California.

Age in Months 3/97 3/98 3/99 3/00 3/01

Trended —Selected

Reported as of

Observations About Growth in Loss Development

Occurring across all types of indemnity claims, industries, and natures of injury

Average permanent disability rating has increased markedly

Frequency of stipulated awards has been increasing

Settlements of “future medical” driving up severity

Claims with attorney involvement have higher development

Settlement “premium” increasing on permanent disability awards

Rapidly Deteriorating Industry Results

11%15%

14%16%

12%15%

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Accident Year

Losses LAE Other Expenses

94%106%

96%81%

125%137%

147%161% 161%

California Workers Compensation Accident Year

Combined Loss And Expense Ratiosas of 12/31/2000

Rapidly Deteriorating Industry Results

Growing Reserve Deficiencies

$0.7$0.4$0.2

$0.7$0.6

1970-1979

1980-1989

1990-1994

1995 1996 1997 1998 1999 2000

Accident Year

As of 12/31/2000

Difference Between Estimated Ultimate Losses And Reported Losses

Insurance Market

Shifts through Withdrawals/Acquisitions/Insolvencies

HMOs Leaving Market

Very Low Reinsurance Rates

High Capitalization & Investment Returns

1994 1999

Calendar Year

Top 5 Insurers Top 6th to 10th Insurers Top 11th to 20th Insurers

Market Concentration Ratios

1994 1999

Calendar Year

Other Insurers California Specialty Insurers State Fund

Note: “California Specialty Insurers” are defined as private insurers who write at least 80% of their Workers Compensation business in California.

Market Share By Type Of Insurer

Future Outlook

1999 — Record Combined Ratio -7% Loss of Equity

2000 — Rates Up Almost 20%, Premium Up 30%

Sharply Increasing Severity/Prior Year Loss Dev.

Relatively Little Improvement Expected in 2000

2001 — Loss Cost Rates Up 10%

Continued Reserve Inadequacies

Likelihood of Large Benefit Increases

Future Outlook

Potential Employer Backlash

Insurance Market

Continued Shift through Acquisitions/Regulatory Action

Little Cheap Reinsurance/HMO’s out of WC

High Capitalization

Potentially Reduced Investment Returns

CALIFORNIA WORKERS COMPENSATION

Documents

STATE OF CALIFORNIA DIVISION OF WORKERS' … Forms/ADJ/DWCForm10214a_2008.pdfDIVISION OF WORKERS' COMPENSATION WORKERS' COMPENSATION APPEALS BOARD STIPULATIONS WITH REQUEST FOR AWARD

State of California Division of Workers' Compensation ... Forms/DEU/DEU101.pdf · State of California Division of Workers' Compensation Disability Evaluation Unit REQUEST FOR SUMMARY

California Division of Workers’ Compensation Medical … · Proposed March 2010 (8 CCR § 9792.5.1(a)) 1 California Division of Workers’ Compensation Medical Billing and Payment

CALIFORNIA WORKERS COMPENSATION 'REFORM'?? SB863

California Workers’ Compensation California Workers’ Compensation DWC 19th Annual Educational Conference Los Angeles February 23 & 24, Oakland March 5 & 6, 2012 Insurance Commissioner

State of California Division of Workers' Compensation ... Forms/DEU/DEU101.pdfState of California Division of Workers' Compensation Disability Evaluation Unit REQUEST FOR SUMMARY RATING

STATE OF CALIFORNIA DIVISION OF WORKERS' COMPENSATION WORKERS' COMPENSATION APPEALS ... Forms/ADJ/DWCF… · · 2014-09-26STATE OF CALIFORNIA DIVISION OF WORKERS' COMPENSATION WORKERS

State of California Division of Workers’ Compensation · PDF fileState of California Division of Workers’ Compensation The 17th Annual Educational Conference Los Angeles Sheraton

State of California Division of Workers’ Compensation ... Forms/ADJ/DWC1.pdf · state of california division of workers' compensation ... application for adjudication of claim

California Division of Workers’ Compensation Medical ... · PDF fileProposed March 2010 (8 CCR § 9792.5.1(a)) 1 California Division of Workers’ Compensation Medical Billing and

California Workers’ Compensation · PDF file2 Insurance Commissioner –CA Department of Insurance Rate Regulation Branch –Rate Filing Bureau • In California, workers’ compensation

The California Commission on Health and Safety and · PDF file1 The California Commission on Health and Safety and Workers’ Compensation Reporting Workers' Compensation Injuries

STATE OF CALIFORNIA Division of Workers’ Compensation ...€¦ · STATE OF CALIFORNIA Division of Workers’ Compensation Workers’ Compensation Appeals Board Document ID: 9093065976089411584

Ambulatory Surgical Services Provided Under California Workers' Compensation

Study of the California Workers' Compensation Insurance Market · PDF fileStudy of the California Workers’ Compensation Insurance Market Presented To: California Commission on Health

Workers Compensation Claim Kit - California · Division of Workers' Compensation Notice to Employees--In juries Caused By Work You may be entitled to workers' compensation benefits

STATE OF CALIFORNIA DIVISION OF WORKERS’ · PDF filestate of california division of workers’ compensation workers' compensation appeals board . case number(s): adj adj . applicant

WORKERS’ COMPENSATION CLAIMS KIT · • In the “Select a Network” drop-down menu, select “Workers Compensation” (except for customers in California, who should select “California

California Division of Workers’ Compensation Medical ...dlse.ca.gov/dwc/DWCPropRegs/Ebilling/Guide... · California Division of Workers’ Compensation Medical Billing and ... “Supporting

CALIFORNIA WORKERS' COMPENSATION RATE COMPARISON