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California's written workers compensation premium dropped 12% in the first nine months of this year compared with the same period in 2019 and is expected to be the lowest since 2012 for the entire calendar year, according to the Workers Compensation Insurance Rating Bureau of California’s quarterly experience report, released Friday.
The average charged rate in workers compensation in the first nine months of this year was 9% below the year-earlier period and 40% below the peak in the state in 2014.
While premium decreases in the first quarter of 2020 were due to declines in insurer charged rates, the second- and third-quarter declines were driven by payroll reductions amid the “sudden and sharp slowdown in the economy,” the bureau said in a statement. Claim activity also declined during the second quarter due to the shutdowns but began ticking back up in the third quarter.
Reported indemnity claims in the second quarter were 13% lower than in the second quarter of 2019, while medical-only claims were 30% lower in both the second and third quarters. However, indemnity claims in the third quarter were 6% higher than the same quarter in 2019, in part due to COVID-19 claims.
Indemnity claims have settled more quickly in the past few years, driven by legislative reforms, but that closure rate declined sharply in the second and third quarters of 2020 because of pandemic shutdowns and are likely to continue to rise as claims remain open longer, the bureau said.
Medical severities have continued to hold steady since 2016, but delays in medical treatment due to the pandemic may lead to an uptick this year, according to the report, as research has shown that treatment delays are often associated with higher medical costs.
The report also noted that cumulative trauma claim rates are still well above pre-Great Recession levels but have held steady since 2016, but the bureau expects these to increase because such claims have been correlated with economic declines.
More insurance and workers compensation news on the coronavirus crisis here.
The Workers’ Compensation Insurance Rating Bureau of California on Wednesday announced that it would not submit its July 1 mid-year filing given the business impacts of coronavirus.