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Casualty Loss Reserve Seminar Workers Compensation Issues: California

Join Donald K. Rainey from Milliman USA for a detailed discussion on current issues in workers' compensation reserves in California. Explore the latest trends, root causes, and drivers affecting loss ratios and frequency. Gain insights on pending legislation and recent structural changes impacting the industry.

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Casualty Loss Reserve Seminar Workers Compensation Issues: California

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  1. Casualty Loss Reserve SeminarWorkers CompensationIssues: California Donald K. Rainey Milliman USA

  2. California tumbles into the sea…

  3. CA WC (Gross of Reins. & Deductibles)WCIRB Minus Industry Reported at 3/02 Source: WCIRB

  4. Root Causes Include … • Decreasing Frequency Drops • Loss Trend Developments • Loss Development Trends • Increasing/High Loss Ratios

  5. CA WC – Frequency per On-Level EP @ 12/01 Trend since 1993 = -2.4% Source: WCIRB

  6. Frequency Drivers – Non Cumulative Injuries • 2/3 of Decline Due to: • Increased Cal/OSHA Enforcement • Shift to Service-Based Economy • Erosion of Statutory Benefits • Slower than Typical Economic Growth • Decline Should Slow Due to AB749 Source: WCIRB

  7. CA WC – Average Cost per Indemnity Claim Source: WCIRB

  8. Severity Drivers • Presumption of Treating Physician • Large Increases in Hospital Costs • Increased Medical Cost Containment Efforts • Mix of Claims Source: WCIRB

  9. CA WC Paid Indemnity LDFs Source: WCIRB

  10. CA WC Paid Medical LDFs Source: WCIRB

  11. CA WC Medical “Paid Loss Trend” Drivers DRAFT study (09/02) results: • Increasing % of Major Claim Counts • Change in Severity of Major Claims is not a Major Cause • Possible Reasons • Major claims immune to drivers of declining frequency. • Up-coding possible but not supported or refuted by study. Source: WCIRB

  12. CA WC Rate Level Index(1989 = 100%) Source: WCIRB

  13. CA WC – Changes in Advisory PP Source: WCIRB

  14. CA WC Pure Loss Ratios @ 6/02 Source: WCIRB

  15. CA WC Combined Ratios @ 6/02 Source: WCIRB

  16. Combined Ratios – CA vs. National Source: WCIRB & NCCI

  17. AB 749 – Benefit Increases From 2003 to 2006 • Max Total Weekly Benefit Increases (Escalates Thereafter) • Maximum PPD Benefits Increase at selected Rating Intervals • Scheduled Number of Weeks Increase for Permanent Disability Benefits (2004) • Benefit Minimums Increase (2003-4, 2006) • Aggregate Death and Life Pension Benefit Maximums Increase (2006) Source: WCIRB

  18. AB 749 – Structural Changes • Primary Treating Physician Presumption • Use of Generic Drugs • Outpatient and Pharmaceuticals Fees Schedules • Settlement of Vocational Rehabilitation Source: WCIRB

  19. AB 749 – Percentage Impact Source: WCIRB

  20. CA WC – Pending Legislation of Note • AB 1985 – Changes Basis for Rate Adequacy • Old: Solvency • New: Loss Cost Plus • SB 2093 – Security Deposits • Cash & Securities, not Surety Bonds • AB 2007 – CIGA fees • Keeps 2% (instead of 1%) through 2007 Source: CWCDAA

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