New reporting from the WCIRB shows that total written premium for the first quarter of 2021 was down 13% from the year before, and that carriers are paying more than they’re collecting in premiums for accident year 2020.
Our friends at WorkCompCentral summarized the WCIRB’s new quarterly experience report, which offers some of the first year-to-year comparisons of hard data both before and after the pandemic. In other words, the data is now coming in, and we can get a better idea of how exactly the pandemic has impacted carriers.
For instance, carriers wrote total premium of $3.6 billion during the first quarter ending on March 31, 2021. This is down $600 million from the first quarter ending on March 31, 2020, where carriers wrote total premium of $4.2 billion.
This appears to be the effect of fewer businesses and a smaller workforce, thanks to the economic upheaval caused by the pandemic.
The report also contains a statistical projection by the WCIRB called the “projected combined ratio” stating that COVID-19 claims are the reason that carriers will lose money on accident year 2020. This statistic is interesting because if the ratio is over 100%, then carriers are paying more in claims than they are receiving in premiums.
The preliminary projected combined ratio for 2020 is 101% – which includes COVID-19 claims. Subtract the COVID-19 claims, and the projected combined ratio for accident year 2020 drops to 96%.
But for COVID-19, carriers would be making a profit with a ratio of 96%. The WCIRB noted that this is similar to the accident year of 2019, which had a projected combined ratio of 95%.
On p. 7 of their quarterly report, the WCIRB noted that 2016 had one of the lowest projected combined ratios on the chart with a rate of 79%, meaning that 2016 was one of the more profitable years on record.
INDEMNITY CLAIMS FREQUENCY
Indemnity claims frequency is another statistic that has always intrigued me, as the Great Recession of the late 2000s and early 2010s had toyed with claims frequencies all over the United States.
For the year of 2020, indemnity claims frequency took a sharp downturn of 6.2% if one excludes COVID-19 claims.
“The sharp decrease in 2020 claim frequency, excluding COVID-19 claims, is likely driven by the sharp downturn in the economy caused by the pandemic and stay-at-home orders,” the WCIRB wrote on p. 9 of their report.
But what happens if one includes COVID-19 claims for 2020?
“Including COVID-19 claims, indemnity claim frequency for 2020 is 8% above 2019,” the ratings agency wrote.
Now let’s compare that to the Great Recession, which began in 2009. During the timeframe of 2009-2012, indemnity claims frequency increased by 10%.
To make sure we’re comparing apples to apples – the Great Recession of 2009 did not have the additional feature of COVID-19 – it just had the regular batch of claims we’ve become accustomed to.
But 2020 did have COVID-19, and COVID-19 claims appear to be the only reason why indemnity claims frequency went up. Otherwise, indemnity claims frequency dropped in 2020, which distinguishes the pandemic from the Great Recession.
When I was a reporter at WorkCompCentral, I had the pleasure of evaluating data from rating agencies at the NCCI and the WCIRB and asking their intelligent experts about it.
The one factor that sets California apart from the other 49 states is our cumulative trauma doctrine, which as we all know allows people to file claims after they’ve been terminated or laid off. This was one of the reasons why California saw a jump in CT claims in accident years 2009-2012 that was higher than accident years 2005-2008.
So did the pandemic increase the rate of CT claims in 2020 over prior years?
Apparently not – the WCIRB wrote that “early estimates based on transactional data for accident year 2020 suggest that CT claim rates have not increased in 2020.”
If one pays careful attention to the WCIRB’s word choice and charts, they’re telling us that all the data for 2020 is not in yet, but this is what their early estimates are showing.
So why didn’t CT claims increase in 2020? Because they already jumped to record levels in 2016.
“Cumulative trauma (CT) claim rates increased through 2016 to be 80% above the 2005 level,” the WCIRB wrote. What were those levels exactly? Here’s what they were:
- 2005 saw 9 CT claims per 100 indemnity claims.
- 2016 saw a record high of 16.2 claims per 100 indemnity claims.
- 2019 saw 16.1 CT claims per every 100 indemnity claims.
Although I am not an actuarial expert, perhaps there is another reason outside the dataset that suppressed the number of CT claims filed. That would be unemployment. Enhanced unemployment benefits likely provided people with the wage loss benefits to help them through the economic upheaval of 2020.
Had those not been provided, it’s this humble blogger’s opinion that the number of alleged CT claims would have jumped way past the previous high in 2016.
It’s really easy for attorneys like me on the ground level of the Workers’ Compensation Appeals Board to draw false conclusions based on correlation. Mistaking correlation for causation is a common mistake in all fields, not just workers’ compensation.
For instance, just because I went to work around sunrise for most of 2019 does not mean that I made the sun rise when I woke up, hopped into my car and drove to court. Similarly, just because I saw a few more CT claims in my caseload during the pandemic doesn’t necessarily mean that there were more CT claims across all of California in 2020.
The actuaries and economists at the big rating agencies have the advantage of collecting all of the claim data for the states, and can show us what’s really going on. They are the historians who will tell us exactly what impact the pandemic had on the California workers’ compensation system from a data-driven perspective, and this can help us anticipate what may happen when the next big economic downturn happens. Please keep in mind that the data is still coming in – future reports may have different conclusions and statistics than this particular quarterly report.
Thus, when they issue their reports, I encourage you to take a look and closely evaluate what they’re saying. Just be willing to put your expectations aside, as sometimes the data tells a different story than the narratives we’ve come to believe.
Got a question about workers’ compensation defense issues? Feel free to contact John P. Kamin. Mr. Kamin is a workers’ compensation defense attorney and partner at Bradford & Barthel’s Woodland Hills location, where he monitors the recent legislative affairs as the firm’s Director of the Editorial Board. Mr. Kamin previously worked as a journalist for WorkCompCentral, where he reported on work-related injuries in all 50 states. Please feel free to contact John at firstname.lastname@example.org or at (818) 654-0411.
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