WCIRB Notes 19% Rise in Rates for First Half

October 16, 2001

On Oct. 8, the Workers’ Compensation Insurance Rating Bureau (WCIRB) released its summary of mid-year California workers’ compensation results, with the report showing that the average charged insurer rates for policies written in the first half of 2001 are 19 percent greater than the average rates charged on 2000 policies and 47 percent higher than the average rates charged in 1999.

The WCIRB reports that average rates are higher now than they have been since early in 1994, one year prior to the transition to open rating in California, but are smaller than they were in 1989.

According to Dave Bellusci, WCIRB chief actuary, due to this rate activity and despite slowing economic activity, the WCIRB expects continued improvement in industry results in 2001 from the record high combined loss ratio of 167 percent estimated for 1999 and the 144 percent estimated for 2000.

However, with continued record levels of loss development on older accident years and growth in average claim severity in excess of the rate of frequency declines, the improvement will likely be moderate.

Among the other highlights of the report are:

* California written premium (gross of deductible credits) for the first six months of 2001 is $5.8 billion, which is more than 32 percent above the comparable 2000 amount.

* Ultimate accident year losses for 2000 are projected by the WCIRB to be $9.1 billion; $0.5 billion greater than for 1999.

* The WCIRB estimates loss ratios of 106 percent, 118 percent, 123 percent and 105 percent for accident years 1997, 1998, 1999 and 2000, respectively. The estimated combined ratios for those years are 151 percent, 164 percent, 167 percent and 144 percent, respectively.

* The 2001 calendar year loss ratio reported by insurers as of June 30, 2001 is 86 percent, eight percentage points smaller than the ratio reported for the first six months of 2000.

* Indemnity claim frequency for the first six months of 2001 is estimated to be 11 percent less than the indemnity claim frequency estimated for the first six months of 2000. This is the largest frequency decrease since 1993 and represents the lowest frequency rate since the WCIRB began recording this information in 1989.

* The WCIRB estimates the average cost of a 2000 indemnity claim will be $38,376, which is seven percent greater than in 1999 and 92 percent greater than in 1994.

Topics California Trends Pricing Trends

Was this article valuable?

Here are more articles you may enjoy.