CWCI STUDY EXAMINES CHIROPRACTIC UTILIZATION AND COSTS IN CALIF. WC

The California Workers' Compensation Institute (CWCI) has issued new research showing the combined effect of an increase in the number of chiropractors treating fewer injured workers with higher levels of chiropractic services per claim has been to drive up both the average cost and the overall cost of chiropractic care in California workers' compensation. California's workers' comp insurer payments to chiropractors climbed from $77 million in 1996 to $195 million in 2001 (a 153 percent increase over six years) pushing chiropractors' share of the workers' comp medical dollar from 11.4 percent to 17 percent, as they surpassed clinics, orthopedists, and physical therapists to become the number one classified medical specialty group rendering treatment to California's injured workers. Notably, the study found that chiropractic costs more than doubled, even though both the number of work injuries in the state and the proportion of workers' comp claims involving chiropractic care declined. Reviewing data from more than 130,000 1993-2000 work injury claims involving chiropractic care, the Institute found that increased utilization of services was the key cost driver. For example, the average number of chiropractic visits per claim increased by almost 50 percent from 20.2 to 29.9 visits in six years, the average number of procedures per claim doubled from less than 59 to more than 120, and the array of different procedures used per claim increased from 6.3 to 8.0. The study also noted that most of the increases in utilization occurred within the first year of injury, suggesting that chiropractors were rendering more aggressive treatment in the early stages of a claim. Furthermore, the report notes that the number of work injury claims was declining as the number of chiropractors was climbing, so the ratio of chiropractors to injured workers increased by one-third between 1995 and 2000. The association between an increasing ratio of providers to injured workers and rising costs and utilization is known as physician-induced demand. CWCI has published the study in a report, "Changes in Utilization of Chiropractic Care in California Workers' Compensation, 1993-2000." Visit www.cwci.org.

WCIRB MAKES 10.6 PERCENT RATE FILING

The WCIRB has submitted a filing with the California Department of Insurance (CDI) recommending that pure premium rates be increased by 10.6 percent effective July 1, 2003 for new and renewal policies with anniversary rating dates on or after July 1, 2003. In his letter accompanying the filing, WCIRB president Robert Mike noted that in the six months since pure premium rates were approved, medical loss experience has continued to deteriorate to the extent that the approved pure premium rates are now significantly inadequate.

The WCIRB filing also contains proposed changes to the Uniform Statistical Reporting Plan and the Experience Rating Plan. These changes address the treatment of premium charges and certified losses related to the Terrorism Risk Insurance Act of 2002. A change in the experience rating eligibility threshold to reflect the recommended increase in pure premium rates is also proposed.

The CDI will hold a public hearing regarding this filing on May 8, 2003.

S&P's ARTICLE DISCUSSES INSURER CREDIT, LIQUIDITY SUPPORT

Standard & Poor's has published an article that explains the rating criteria for credit and liquidity support provided by insurers. Capital-markets transactions are often supported by credit or liquidity features, which provide prompt payment of principal and interest in the event of a disruption to—or shortfall in—transaction cash flows. These are available from a number of providers, usually in the financial services and insurance sectors. Both credit support and liquidity payments are needed on a timely basis to support the payment on the rated obligation. "Insurers generally provide these types of support through investment agreements, GICs, annuities, swaps, and liquidity lines," noted S&P's credit analyst Mark Puccia. "To rate an investment product as highly as the insurance company is rated, Standard & Poor's will generally ask for assurance that the investment product will receive the same priority as policy claims in the event of an insurer insolvency for the purpose of insurance law." According to the report, it is clear that the market participants expect insurance companies to pay on any investment product in a timely fashion in accordance with the terms of the product. This is a contrast with ordinary policies, for which the market expectation is that the insurance company will contest the claim, raise defenses, and pay only when satisfied regarding the full compliance with terms and conditions. The commentary, which is titled "Criteria for Credit and Liquidity Support Provided by Insurers," can be found on RatingsDirect, S&P's Web-based credit analysis system.

ACIC'S 14TH ANNUAL GENERAL COUNSEL SEMINAR SET FOR JULY

Insightful speakers and informative panels will present the most up-to-date overviews of issues affecting P/C insurers writing business in California during the Association of California Insurance Companies' 14th Annual General Counsel Seminar this summer. The two and one-half day seminar will take place July 23-25 at the Bellagio in Las Vegas, and will feature topical case reviews, panel discussions and presentations from key industry experts. Speakers include California Insurance Commissioner John Garamendi, California Assembly Insurance Chairman Juan Vargas, and California Attorney General Bill Lockyer. Officials from the Nevada Department of Insurance, the California Chamber of Commerce and representatives of other P/C industry groups will also be in attendance. ACIC president Sam Sorich said, "Insurance industry executives, legal counsel, legislative and regulatory affairs advocates, underwriting managers and claims managers who have an interest in California legislative, judicial and regulatory activities are encouraged to sign up soon and secure their spot to attend this unparalleled seminar and networking opportunity." Punitive damages, privacy, appellate case reviews, market conduct exams, and national trends in insurance legislation and regulations will be among the issues introduced during the panel discussions. Hot topics such as unfair business practices, credit-based insurance scoring, workers' compensation, homeowners insurance and the increasingly important public relations side of the industry also will be addressed. For more information, contact Sam Sorich at (916) 442-4581.

ABS EQECAT TO HOLD 2003 EUROPEAN CATASTROPHE MANAGEMENT SUMMT IN BARCELONA

Oakland-based EQECAT, Inc. announced that its 2003 European Catastrophe Management Summit will take place on June 24-27 at the Hotel Princesa Sofia InterContinental in Barcelona, Spain. "This year the European Summit will address solutions to the challenges faced by insurers, reinsurers and the financial markets of managing extreme risks," said the bulletin. Topics will include: The latest breakthrough in European Windstorm modeling; The impact of the recent world-wide earthquake research findings; Quantifying and managing terrorism risk—How it can be done effectively; New CAT Reinsurance alternatives—Swaps, index bonds, CAT bonds; Climate Change—why insurers are concerned and how CAT models can help to quantify the financial impact; The latest innovations in catastrophe management models. "Speakers will include leading researchers, insurance industry experts, as well as EQECAT scientists and engineers. A mixture of lectures, panel sessions, workshops and networking opportunities will ensure that participants reap maximum benefit from this event," it continued. The cost of attending the conference is 895 Euros (around $950); reservations are required. For more information contact Riccardo Ciccozzi at +44 20 7377 4501, Neil Catford at +49 6192 979104 or e-mail requests to eqecat@absconsulting.com.