The WCIRB has released its quarterly update on California statewide insurer experience valued as of March 31, 2018. Highlights of the report include:

California written premium for the first calendar quarter of 2018 is $5.0 billion, which is consistent with the written premium reported for the first calendar quarter of 2017. The decrease in 2017 following 7 consecutive years of increases is primarily driven by decreases in insurer charged rates.

The projected industry average charged rate per $100 of payroll for policies incepting between January 1, 2018 and March 31, 2018 is $2.38, which is 6% below the average rate charged for policies incepting in 2017. The July 1, 2018 approved advisory pure premium rates are on average 37% below those for January 1, 2015.

The projected combined ratio for 2017 is 5 points higher than 2016 as premium levels have lowered while average claim severities increased moderately. Despite the recent increase, combined ratios for 2014 to 2017 remain the lowest since the 2004 through 2006 period.The WCIRB projects the ultimate accident year combined loss and expense ratio for 2017 to be four points above that for accident year 2016, driven by higher medical severities for 2017 and lower premium rates.

Indemnity claim frequency increased by 11% from accident year 2009 to accident year 2014, but has decreased by 5% from accident year 2014 through the first three months of accident year 2018. Indemnity claims continue to settle quicker, steadily improving over the last 5 years. Frequency increases since 2011 have largely been attributed to increases in cumulative injury claims and claims from the Los Angeles Basin area.

Cumulative trauma (CT) claim rates continue to be at high levels in 2016 and the ratio of CT claims to all indemnity claims has increased by over 65% since 2005. The sharp increase in CT claims since 2012 is in the Los Angeles and San Diego areas, as CT claims in other regions of CA have decreased. The WCIRB will be publishing a study of CT claim patterns later this year.

Projected claim severity for 2017 is 2.5% higher than that for 2016, following several years of relatively flat severities. 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.

Indemnity severity increases in 2014 are largely attributable to SB 863 increases to PD benefits. Indemnity severity growth since 2014 has been relatively modest and generally consistent with wage inflation.

Decreases in medical severities from 2011 to 2015 were driven by the medical cost savings arising from SB 863. It is unclear whether the projected 2017 medical severity increase of 3% will develop downward like other recent years or if it represents a return the more typical rates of post-reform medical inflation.

Pharmaceutical costs per claim decreased 70% from 2012 to 2017. These reductions have been driven by SB 863’s IMR & IBR, reduced utilization of opioids, and changes to Medi- Cal reimbursement rates. The new drug formulary effective in 2018 is expected to further reduce pharmaceutical cost levels.

SB 1160 and AB 1244 made changes to lien filings effective 1/1/2017. Some of the lien activity in the fourth quarter of 2016 through the first quarter of 2017 may be impacted by the transition to the reforms. The number of liens filed since the first quarter of 2017 are 40% below pre-SB 1160 and AB 1244 levels.

The full report is available in the Research section of the WCIRB website (wcirb.com) and linked below: