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CALIFORNIA WORKERS COMPENSATION

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CALIFORNIA WORKERS COMPENSATION. A System Under Siege. Presented by: Bill Miller, FCAS, MAAA Tillinghast–Towers Perrin (949) 253-5242 [email protected] September 2001. Pre-Open Rating Period 1993 to 1994. Heavily Regulated Pricing No Pricing Deviations - PowerPoint PPT Presentation

Text of CALIFORNIA WORKERS COMPENSATION

CA Workers Compensation - A System Under SiegeHeavily Regulated Pricing
No Pricing Deviations
Profitable Results
Strong Reserves
Declining Frequency
Note: Subsequent downward development on industry reserves occurred.
Note: After double digit frequency increases in 1990 and 1991, frequencies dropped 13%, 19%, and 5% in 1992, 1993, and 1994.
CLRS0901.PPT/crf/Irvine
Insurance Market
Non-Concentrated Market
CLRS0901.PPT/crf/Irvine
Great Pricing Flexibility
Heavy Price Competition
Note: Commissioner approved loss costs, use of LCMs and schedule rating to compete for market share.
CLRS0901.PPT/crf/Irvine
Great Pricing Flexibility
Heavy Price Competition
Great Pricing Flexibility
Heavy Price Competition
Reserve Deficiencies
CLRS0901.PPT/crf/Irvine
Insurance Market
Favorable Investment Returns
Continued Heavy Price Competition
1/1/89
1/1/90
1/1/91
1/1/92
1/1/93
1/1/94
10/1/94
1995
Avg.
1996
Avg.
1997
Avg.
1998
Avg.
1999
Avg.
2000
Avg.
CLRS0901.PPT/crf/Irvine
Continued Heavy Price Competition
Continued Declines in Frequency
CLRS0901.PPT/crf/Irvine
Continued Heavy Price Competition
Continued Declines in Frequency
As of 12/31/2000
Continued Heavy Price Competition
Continued Declines in Frequency
CLRS0901.PPT/crf/Irvine
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
CLRS0901.PPT/crf/Irvine
Continued Heavy Price Competition
Continued Declines in Frequency
as of 12/31/2000
Continued Heavy Price Competition
Continued Declines in Frequency
As of 12/31/2000
Losses ( in billions)
Insurance Market
Market Share By Type Of Insurer
Note: “California Specialty Insurers” are defined as private insurers who write at least 80% of their Workers Compensation business in California.
CLRS0901.PPT/crf/Irvine
Sharply Increasing Severity/Prior Year Loss Dev.
Relatively Little Improvement Expected in 2000
2001 — Loss Cost Rates Up 10%
Continued Reserve Inadequacies
CLRS0901.PPT/crf/Irvine
Little Cheap Reinsurance/HMO’s out of WC
High Capitalization
100
179
202
283
341
317
277
232
194
197
Jan-73Jan-78Jan-83Jan-88Jan-93Jul-93Jan-94Oct-941995
Avg.
1996
Avg.
$7.8
$8.4
$8.4
$8.5
$8.9
$7.7
$4
$6
$8
$10
Calendar Year
Top 5 InsurersTop 6th to 10th InsurersTop 11th to 20th Insurers
68%
11%
15%
78%
12%
16%
83%
15%
16%
66%
14%
16%
54%
12%
15%
60%
15%
18%
84%
21%
20%
95%
22%
20%
102%
24%
21%
113%
26%
22%
116%
24%
21%
101%
22%
21%
0%
50%
100%
150%
200%
198919901991199219931994199519961997199819992000
-5.7%
-5.9%
-6.2%
12.0%
10.2%
-13.1%
-19.7%
-3.9%
-2.1%
-0.3%
-7.4%
-25%
0%
25%
89-9090-9191-9292-9393-9494-9595-9696-9797-9898-9999-00

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