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Insurer Aggregate Financial Data and Pure Premium Rates

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Insurer Aggregate Financial Data and Pure Premium Rates

April 14, 2014

Aggregate financial data reported by insurers is a critical component in the determination of advisory pure premium rates. Learn more about exactly what data is being collected and what it represents.

California advisory pure premium rates reflect a projection of losses and loss adjustment expenses per $100 of payroll for each of the approximately 500 standard classifications used in California. The data used to calculate the pure premium rates proposed by the WCIRB is derived from aggregate financial data from insurers who have workers’ compensation underwriting and claims experience in California. The WCIRB collects the aggregate financial data through various data calls each year. One of these data calls is the Quarterly Call for Direct California Workers’ Compensation Experience (Quarterly Call).

Quarterly Calls

The Quarterly Call requests premium and loss information that is valued as of the end of each quarter, and results from analysis of each quarter’s data is presented to the WCIRB’s Actuarial Committee. While the WCIRB submits an annual advisory pure premium rate filing in the third quarter of each year, we monitor changes in California workers’ compensation costs throughout the year based on information collected from subsequent Quarterly Calls. To the extent that significant changes are identified in the Quarterly Call data, the WCIRB may recommend mid-year changes to the advisory pure premium rates in a special mid-year pure premium rate filing.

The Quarterly Call provides the basis for determining the loss and allocated loss adjustment expense (“ALAE”) portion of the proposed pure premium rate. Premium, loss, ALAE, and claim count information are requested at an “aggregated” basis (totals over all policies or all claims) for each specified time period. The time period for premium information is typically the policy inception year within a calendar year/quarter. For claims information, the time period is typically an accident year. The amounts reported on each Quarterly Call are valued at the end of the quarter.

Premiums are reported at the insurer rate level and at the advisory pure premium rate level. The insurer rate level is analogous to the premiums actually charged to the policyholders, with certain exceptions – the most significant being that the premiums reported do not include deductible credits. The advisory pure premium rate level is the amount of premium that results from simply applying the California Insurance Commissioner’s approved advisory pure premium rates in effect for that policy inception period in addition to the application of any experience modifications.

Loss amounts are reported separately for indemnity and medical costs. These costs are further broken down by cumulative loss amounts paid, case reserves, and incurred but not reported (IBNR) losses. The cumulative loss amount paid is the amount paid from the time the claims were first reported to the insurer through the evaluation date of the data call. The case reserves are the amount reserved for known claims as of the evaluation. The IBNR reserves include estimates of future loss payments for claims that have not yet been reported as well as potential changes in the ultimate value of known claims.

Other data reported on the Quarterly Calls include:

  • Various subcategories of paid losses
  • ALAE amounts paid from the time the claims were first reported to the insurer through the evaluation date of the data call
  • Various claim count-related information (which represents the number of claims that have at least some dollars paid or reserved)

For more information about the calls and instructions for reporting, please visit the Data Reporting section.

Suggest a Topic

If you would like to suggest a topic for an upcoming WCIRB Data Points, please email [email protected]