The WCIRB just published its 2021 State of the System report. Highlights of the report show the recent changes in premium revenue, claims, and costs.

The sharp and sudden employment drops in 2020 significantly impacted workers’ compensation exposure, the number of claim filings and claims activity. Premium levels dropped sharply in 2020 due to continued insurer rate decreases and the pandemic-related economic slowdown. Premiums are forecast to increase modestly in 2021 with economic recovery and the impact of insurer rate decreases moderating.

The insurance market remains stable and non-concentrated. Insurer charged rates continue to decrease and are now at a 50-year low. Average indemnity claim costs are rising, while average medical claim costs remain relatively flat. The impact of the pandemic on average claim costs in the long-term remains uncertain.

Average insurer rates charged for the first quarter of 2021 are only 2% below the rates charged in 2020, possibly signaling a sign of moderating insurer rate decreases and potential future hardening of the insurance market. Total written premium is forecast to increase modestly in 2021 with the economic recovery and moderation of the impact of declining premium rates, but would still be well below the level from 2014 to 2019.

California had the highest rates in the country until 2018, when rate declines moved it from the top spot. It is now the fourth highest, behind New Jersey, New York, and Vermont.

Almost 150,000 COVID-19 claims have been filed in the California workers’ compensation system. The impact of the filing of so many COVID-19 claims in 2020 on claim frequency was in part offset by a reduction in the number of non-COVID-19 claims filed. Over one-half of the almost 150,000 COVID-19 claims filed in the California workers’ comp system as of June 1, 2021 were within the insured system.

Over time, the ratio of COVID-19 claims relative to statewide infections declined as the COVID- 19 workers’ compensation presumption created by Senate Bill (SB) No. 1159 was more restrictive than the Governor’s Executive Order issued in spring 2020.

The winter surge resulted in over 2 million infections statewide and the largest volume of COVID-19 workers’ compensation claims filed during the pandemic. COVID-19 claims as a percent of all indemnity claims peaked in December 2020 during the winter surge of infections. As vaccines rolled out in spring 2021, the proportion of COVID-19 claims has been very modest. A much higher than projected share of COVID-19 claims has been filed by younger workers. Younger individuals are more likely to have mild COVID-19 symptoms.

Currently projected costs of COVID-19 claims in the insured system for accident years 2020 and 2021 are over $1 billion in total.

Preliminary estimates suggest the CT claim share of indemnity claims for accident years 2020 and 2021 are significantly below the 2018 and 2019 levels. The vast majority of increases in CT claims since 2012 came from the Los Angeles Basin and San Diego areas.

Following the implementation of reforms related to lien filings of SB 863 (in 2013) and SB 1160 and Assembly Bill (AB) 1244 (in 2017), the number of lien filings dropped significantly. The number of liens filed in 2020 is over 70% below the pre- SB 1160 and AB 1244 level.

Combined ratios in California have historically been volatile. Recent industry ratios have been fairly stable, with seven consecutive years of combined ratios below 100% from 2012 to 2019. Combined ratios since 2016 have been increasing primarily due to lower premium levels driven by lower insurer rates and higher expense ratios. The combined ratio for 2020 is the first above 100% since 2012. Excluding the impact of COVID-19 claims, the 2020 combined ratio would be 96%.