|
New data from
the Workers' Compensation Insurance Rating
Bureau of California indicate that reforms are
still unclogging the system, yielding positive
results for the industry and employers.
Aggregate California workers' comp premium
continues to slide and loss ratios hit new
lows in the third quarter of this year, the
Bureau reports in its analysis of 2005
accident year losses through September of this
year.
Calendar year
premium for the first nine months of 2006 was
$12.8 billion, 21 percent less than in the
first nine months in
2005. In
addition, the average workers' comp rate per
$100 of payroll was $3.21 in the third quarter
of this year, compared to $4.52 in the second
half of 2005 and a peak of $6.47 in the second
half of 2003.
And premiums
are poised to drop further after most carriers
filed high single digit rate decreases for
policies incepting in January 2007.
The average
accident year loss and combined ratios for
2005 were respectively 30 percent and 54
percent. Loss ratios were as high 138 percent
prior to the reforms, meaning that for every
dollar a carrier was taking in, it paid out
$1.38. The Bureau projects aggregate industry
losses of $6.4 billion for 2005, 11 percent
less than estimates for 2004 and 46 percent
less than 2002 estimates.
Meanwhile,
reserves are in the black. Estimated ultimate
accident year losses as of December 31, 2005
were at least $8 billion less than what
carriers have reserved for. At its peak in
2001, the California workers' comp market was
almost $12 billion under reserved.
The only
black mark is that the average cost of an
indemnity claim increased in 2005 to $38,200
from $36,426 the year prior. Bureau actuaries
attributed this latest increase to the fact
that reforms have squeezed small permanent
disability claims out of the system, leaving
mostly the more severe and expensive claims.
Regardless, the recent costs are still a far
cry from 2002, when the average indemnity
claim was about $46,500.
|
