Menu Close

The Workers’ Compensation Insurance Rating Bureau of California released its 2020 State of the System report highlighting key metrics of the California workers’ compensation system. While much of the historical data in the report predates the COVID-19 pandemic, the pandemic and resultant stay-at-home orders will likely impact premium levels, claim frequency and claim severity in 2020 and beyond.

WCIRB Chief Actuary David Bellusci and the Vice President, Actuarial Services Tony Milano discussed the State of the System report in a webinar that you are able to view. Here are some of the highlights of the Report and the webinar.

The sharp decrease in employment projected for 2020 combined with continued decreases in insurer rates will contribute to a large decrease in premium for 2020. The WCIRB is expecting a roughly $3.5 billion decline in written premium in 2020, from $15.9 billion in 2019 to $12.5 billion this year.

California had the highest rates in the country until 2018, when rate declines moved it from the top spot. The highest rates are now found in New York.

Average insurer rates are down almost 40% since 2015. Current charged rates are at the lowest level in approximately 50 years, as over the long term declining claim frequency and increasing wage levels have offset rising medical costs and increases in indemnity benefits.

The average charged rates per $100 of payroll fell to $1.96 in 2019 from a peak of $2.97 in 2014. The rate is expected to dip to $1.81 in 2020.

However, average insurer manual rates are significantly above the rates charged to employers, indicating that insurers are, on average, applying significant pricing discounts to their filed rates.

The report also examined Gov. Gavin Newsom’s order during the height of the pandemic regarding a rebuttable assumption of compensability for all workers directed by their employer to work outside their home. “We estimate about 30,000 claims arising during this period generating about $1.2 billion in costs,” Bellusci said in his webinar discussing the report.

In the WCIRB’s evaluation of the Governor’s Executive Order, the low-range estimate was $0.6 billion, the mid-range estimate $1.2 billion and the high-range estimate $2.0 billion. These estimates are lower than those in an earlier WCIRB estimate.

According to Bellusci, recent data from the Division of Workers’ Compensation shows about 15,000 COVID-19 claims so far. As expected, the vast majority of COVID-19 claims reported to the Division of Workers’ Compensation are in the health care and government/public administration sectors. It is likely as California’s economy begins to re-open that the industry mix of COVID-19 claims will be more dispersed.

The report shows pre-pandemic cost trends were generally stable with modest frequency and severity growth, continued high levels of frictional costs and significant regional differentials, while 2020 claim frequency could be impacted by the economic downturn and surges of COVID-19 and post-termination claims.