San Francisco, CA – The WCIRB has released its quarterly update on California statewide insurer experience valued as of March 31, 2015.
Highlights of the report include:
California written premium (gross of deductible credits) for calendar year 2014 is approximately $16.5 billion, which is approximately 11% above the written premium reported for 2013 and 88% above the written premium reported for 2009.
Written premium for the first quarter of 2015 is approximately $4.8 billion, up 9% from the written premium reported for the first quarter of 2014.
The projected industry average charged rate (rates charged by insurers that reflect all rating plan adjustments except deductible credits, retrospective rating plan adjustments, terrorism charges, and policyholder dividends) per $100 of payroll for policies incepting between January 1, 2015 and March 31, 2015 is $3.09. By comparison, this rate is approximately 4% above the average rate charged for 2014, 47% above the average rate charged for 2009, but 51% less than the average rate charged for the second six months of 2003.
The WCIRB projects total ultimate losses and allocated loss adjustment expense (ALAE) for accident year 2014 to be $12.9 billion, an increase of approximately 7% from the accident year 2013 projection and an increase of 30% from the accident year 2009 projection. Despite these increases, total ultimate losses and ALAE remain below the highs experienced prior to the 2002 through 2004 reforms.
The WCIRB projects an ultimate accident year loss and ALAE ratio of 79.4% and an ultimate accident year combined loss and expense ratio of 105% for accident year 2014. These projections continue the downward trend over the last several accident years, which is primarily the result of increased premium levels and low claim severity growth for the last several years.
The calendar year combined loss and expense ratio for 2014 reported by insurers is 104%, which is somewhat below the combined ratios for the last several years; however, 2014 is the seventh consecutive year with a combined ratio over 100%.
The WCIRB projects indemnity claim frequency for accident year 2014 to be 0.2% below the frequency for 2013 but approximately 10% above the frequency for 2009. The projected indemnity claim frequency for the first quarter of 2015 is 3.5% lower than that for 2014, but it is unclear whether the frequency decrease in the first quarter of 2015 is an anomaly or whether it is representative of a return to the historical long-term pattern of declining claim frequency.
The WCIRB projects the average cost (or “severity”) of a 2014 indemnity claim to be approximately $86,000, up 7% from 2013 primarily due to SB 863 increases to permanent disability benefits effective in 2014.
The projected average medical cost—including medical cost containment program (MCCP) costs—of a 2014 indemnity claim declined for the third straight year and is 5% below the projected average medical cost for 2011. Despite the enactment of SB 863, which was forecast to decrease ALAE costs, the projected average ALAE cost of a 2014 indemnity claim, excluding MCCP costs, is approximately 10% above that of the prior year and approximately 16% higher than the average ALAE severity for 2012.
The full report is available in the Research and Analysis section of the WCIRB website or by clicking here: CA WCIRB: Summary of First Quarter 2015 Insurer Experience (PDF)
Source: CA WCIRB