California's workers' compensation reforms in recent years have had a significant effect in lowering loss ratios and premiums, according to a report by the state Workers' Compensation Insurance Review Board.
In a summary of the insurer experience as of Sept. 30, the WCIRB found that written premium for the first nine months of 2005 was $16.3 billion, roughly 10 percent lower than for the first nine months of 2004.
WCIRB found the average rate per $100 of payroll fell even more sharply, dropping 18 percent from $5.37 in the first half of 2005 to $4.42 for the third quarter.
Based on the estimated affect of the reforms, enacted through Assembly Bill 227, Senate Bill 228 in 2003 and Senate Bill 899 in 2004, the WCIRB projected that ultimate accident-year losses for 2004 will be $8.4 billion, a decrease of 24 percent from the current projections for 2003 and 33 percent from the projections for 2002.
Those numbers represent what insurers will pay in total for claims from those particular years.
The WCIRB also determined that the ultimate accident-year loss ratio will be 36 for 2004, down from 54 for 2003 and 85 for 2002.
For the calendar year, the loss ratio for the first nine months of 2005 was 57, five points lower than that for the same time period in 2004.
The WCIRB also said the combined ratio for workers' comp for 2004 is 85.
Claim frequency and costs have also decreased sharply. The WCIRB said indemnity claims frequency during the first nine months of 2005 decreased by 11 percent from the same time period in 2004, and is at less than half of the all time high set in 1991.
In terms of cost, the board found the average cost of an indemnity claim in 2004 was $41,000, down 10 percent from 2003 and 15 percent from 2002. However, the board noted, the average cost of a claim in 2004 was still twice that of a claim in 1993.
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