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Workers comp premiums drop in California

Posted On: Apr. 11, 2019 1:47 PM CST

Declining premiums

In a second year of declines, California workers compensation written premium for 2018 fell 4% below that for 2017, as recent declining premium rates more than offset payroll growth, according to a quarterly reported released Thursday by the Workers’ Compensation Insurance Rating Bureau of California.

The numbers represent a 6% drop from 2016 figures, according to the report based on statewide workers compensation insurer loss and premium experience through Dec. 31, 2018.

The report by the Oakland, California-based group also revealed:

•          The industry average charged rate per $100 of payroll for policies incepting in 2018 of $2.25 is 11% below that for 2017 and 24% below the peak in 2014.

•          The projected combined ratio for 2018 of 91% represents the sixth consecutive year of combined ratios below 100%. However, the 2018 combined ratio is 6 points above that for 2017, driven by higher severities for 2018 and lower premium rates.

•          Indemnity claims continue to settle quicker, and the ratio of claim closure for 2018 represents a 19-year high.

•          Indemnity claim frequency increased by 11% from 2009 to 2014 but decreased by 7% from 2014 through 2018.

•          Cumulative trauma claim rates continued to be at high levels in 2017, and the ratio of CT claims to all indemnity claims increased by more than 89% since 2005.

•          The estimated accident year 2018 loss and allocated loss adjustment expense severity on indemnity claims is 6% higher than for 2017. This represents the second year of increases following five years of modest declines.

•          Pharmaceutical costs per claim decreased by 69% from 2012 to 2017 and continued to decrease through the first six months of 2018, when the new drug formulary became effective.

•          Lien filings since 2016 have declined significantly, with the number of liens filed in the last two quarters of 2018 dropping 60% below prereform measures.