Calif. comp rate projection falling, but combined ratio inching upPosted On: Oct. 25, 2018 2:22 PM CST
The average workers compensation rates charged by insurers operating in California is trending lower, but the projection of the sector’s combined ratio is inching up, according to a new report.
The projected industry average charged rate per $100 of payroll for policies incepting in the first six months of 2018 is $2.35, which is 7% below the average rate charged in 2017, according to the report issued by the Workers' Compensation Insurance Rating Bureau of California on Thursday.
The projected combined loss and expense ratio of 88% for 2017 is 4 points higher than 2016 as premium levels have lowered while average claim severities increased moderately, according to the report.
California written premium for the first six months of 2018 is $9.1 billion, which is consistent with the written premium reported for the same period in 2017, according to the report. Written premium for 2017 totaled $17.7 billion.
The bureau projects the average cost or severity of a 2017 indemnity claim to be approximately $71,000, which is 2% higher than the projected severity for 2016 following several years of relatively flat severities.
After increasing by 11% from 2009 to 2014, indemnity claim frequency decreased by 6% from 2014 through the first 6 months of 2018.
“Indemnity claims continue to settle quicker, steadily improving over the last 5 years,” the report stated. “The ratio of open claims closing in 2018 (33%) represents a 19-year high.”
Pharmaceutical costs per claim decreased 70% from 2012 to 2017, driven by the independent medical review and independent bill review provisions of California’s SB 863 reform bill, reduced utilization of opioids and changes to MediCal reimbursement rates.
“The new drug formulary effective in 2018 is expected to further reduce pharmaceutical cost levels,” the report stated.