The Workers’ Compensation Insurance Rating Bureau of California has published its report on insurer loss and premium experience valued as of June 30, 2020. This Quarterly Experience Report contains charts illustrating current cost drivers in the system. Highlights of the findings include the following.

Written premium for the first two quarters of 2020 is 11% below that for the first two quarters of 2019. The impact of the COVID-19 crisis on the California economy is expected to significantly reduce employer payroll and insurer premium for the remainder of 2020. The large decrease in premium for the second quarter of 2020 is driven by the sudden and sharp slowdown in the economy.

The average charged rate for the first two quarters of 2020 is 8% below that for 2019 and 40% below the peak in 2014. The January 1, 2020 approved advisory pure premium rates are on average 47% below those for January 1, 2015. Absent COVID-19, the indicated average advisory pure premium rate for January 1, 2021 was slightly below the 2020 level. However, when including the COVID-19 claim impact, the WCIRB proposed a 2.6% increase in average advisory pure premium rates.

The projected combined ratio for 2019 is 8 points higher than 2018 and 16 points higher than the low point in 2016 as premium levels have lowered while claim costs increased moderately. Despite the recent increase, combined ratios for 2013 through 2019 are below 100% and are the lowest since the 2003 through 2007 period.

Claim activity in the second quarter of 2020 was significantly slower due to the pandemic and shelter-in-place period and may not be indicative of future claim activity.

Indemnity claims have settled quicker over the last several years, largely driven by SB 863 and SB 1160 reforms. Average claim closing rates declined sharply in the second quarter of 2020 as a result of the pandemic and shelter-in-place period.

Incremental reported claims have generally increased through 2019. Reported indemnity claims in the second quarter of 2020 were 10% lower than the second quarter of 2019, while medical-only claims were one-third lower. The recent lower claim counts are likely due to the slowdown of economic activity, less work being done outside the home, and delays in reporting of claims during the shelter-in-place period.

The number of liens filed in 2019 and 2020 are more than 60% below pre-SB 1160 and AB 1244 levels. Lien filings decreased in the first two quarters of 2020, though some of the decrease is likely due to the pandemic.