The WCIRB has completed its review and analysis of September 30, 2017 experience submitted by insurers. This report is based on data reported to the WCIRB by insurers who wrote almost 100% of the statewide market.

Overall, 2017 is expected to be a comparatively good year for California workers’ compensation insurance carriers.

First the bad news. Written premium will decrease slightly. California written premium (gross of deductible credits) for 2016 is approximately $18.1 billion, which is 3% above the written premium reported for 2015. Written premium for the first nine months of 2017 is $13.5 billion, which is 4% below the written premium reported for the first nine months of 2016.

The projected industry average charged rate (rates charged by insurers that reflect all rating plan adjustments except deductible credits, retrospective rating plan adjustments, terrorism charges, and policyholder dividends) per $100 of payroll for policies incepting in the first nine months of 2017 is $2.47. This is 10% below the average rate charged in 2016 and 17% below the average rate charged in 2015. The approved January 1, 2018 advisory pure premium rates are on average approximately 30% below the January 1, 2015 advisory pure premium rates.

The reduction in overall premium dollars for the year is not unexpected in light of the success of recent system reform efforts.

The good news is that despite the reduction in total premium dollars, the underwriting profits have dramatically improved as a result of claim cost containment.

The combined ratio is a measure of profitability used by an insurance company to indicate how well it is performing in its daily operations. The ratio is typically expressed as a percentage. A ratio below 100% indicates that the company is making underwriting profit while a ratio above 100% means that it is paying out more money in claims that it is receiving from premiums.

The WCIRB projects an ultimate accident year combined loss and expense ratio of 90% for 2016. Of this ratio, 54% is attributable to the indemnity and medical loss ratio, 18% is attributable to the loss adjustment expense ratio, and 18% is attributable to the other expense ratio. This projection is generally consistent with the ratios for the prior two accident years, which represent the lowest combined ratios since the 2004 through 2006 period.

It is important to remember that the combined loss and expense ratio was projected at 131 in the year 2000. A projection now that is under 100 is a remarkable improvement in underwriting profit results.

The WCIRB projects indemnity claim frequency for accident year 2016 to be approximately 1% below the frequency for 2015 but 10% above the frequency for 2009. The frequency increases experienced in 2010 through 2014 are largely attributed to increases in cumulative injury claims, late reported indemnity claims, claims involving injuries to multiple body parts, and claims from the Los Angeles Basin area. 2015 and 2016 represent the first consecutive years of projected indemnity claim frequency decline since before the Great Recession. The projected indemnity claim frequency for the first nine months of 2017 is approximately 1% higher than that for 2016.

The WCIRB projects the average cost (or “severity”) of a 2016 indemnity claim to be approximately $78,000, which is 2% higher than the projected severity for 2015. Total claim severity growth over the last several years has been relatively modest as increases in average indemnity and ALAE costs have been in part offset by declines in average medical costs through 2016.