WCIRB Report on Year-End 2013 Insurer Experience Released
The WCIRB has completed its report on insurer loss and premium experience through December 31, 2013. The major findings of the report include:
California gross written premium for calendar year 2013 is approximately $14.8 billion, which is approximately 18% above the written premium reported for 2012 and 68% above the written premium reported for 2009. The increase is written premium in 2013 is primarily attributable to increases in insurer rates.
The projected industry average charged rate per $100 of payroll for 2013 policies is $2.85, which is approximately 10% above the average rate charged for the second half of 2012 but remains approximately 55% less than the average rate charged for the second six months of 2003.
The WCIRB projects total ultimate losses and allocated loss adjustment expenses (ALAE) for accident year 2013 to be $12.5 billion, which is approximately 7% above the projection for accident year 2012 and 29% above the projection for accident year 2009.
The WCIRB projects an ultimate accident year combined loss and expense ratio of 123% for 2012 and preliminarily projects a combined ratio of 113% for accident year 2013. These projections are below that of the last several accident years primarily as a result of increasing premium levels in 2012 and 2013.
The preliminary calendar year combined loss and expense ratio for 2013 reported by insurers is 109%, which is somewhat below the combined ratios for the last few years but represents the sixth straight calendar year with a combined ratio of over 100%.
The WCIRB projects indemnity claim frequency for accident year 2013 to be 4.7% above the frequency for 2012 and 6.6% above the frequency for 2011. A preliminary analysis of the 2012 frequency increase by the WCIRB largely attributed it to increases in cumulative injury claims, permanent disability claims, claims involving injuries to multiple body parts, and claims from the Los Angeles/L.A. Basin regions.
The WCIRB projects the average cost (or “severity”) of a 2013 indemnity claim to be approximately $87,000, which is slightly above the projected severities for accident years 2011 and 2012. Despite the enactment of Senate Bill No. 863 (SB 863), which was forecast to decrease ALAE costs, the projected average ALAE cost of a 2013 indemnity claim, excluding MCCP costs, is approximately 3% above that of the prior year and approximately 88% higher than the average ALAE severity for 2005.