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The report, issued by the Workers' Compensation Insurance Rating Bureau of California, highlighted data from insurers in the state for the first half of the year. According to the report, written premium in California (gross of deductible credits) reported for the first six months of 2008 is estimated at $5.5 billion. Researchers said this is approximately 20 percent below the written premium reported for the first six months of 2007.

The WCIRB found that the average statewide insurer rate -- final insurer rates reflecting all rating plan adjustments except deductible credits, retrospective rating plan adjustments, and policyholder dividends --per $100 of payroll for policies written in the first six months of 2008 was $2.48. Researchers said this is 15 percent below the average rate charged in the first six months of 2007 and approximately 62 percent below the average rate charged in the second six months of 2003 when lawmakers enacted comprehensive reforms to the California workers' comp system.

Ultimate accident year losses increased. The WCIRB projected total statewide ultimate accident year losses for 2007 of $6.8 billion. Researchers said that while this is 8 percent above the 2005 level, the 2007 amount remains well below the pre-reform levels.

The WCIRB projected an ultimate accident year loss ratio of 52 percent for accident year 2007. Researchers said this loss ratio, while still low compared to historical norms, represents a 13 percent increase from the estimated accident year 2006 loss ratio and a 22 percent increase from the estimated accident year 2005 loss ratio. The WCIRB said this increase was primarily the result of declining premium rates.

The ultimate accident year 2007 combined loss and expense ratio was estimated by the WCIRB to be 87 percent. Researchers said this is the fifth consecutive accident year with combined ratios estimated to be below 100 percent, after eight consecutive years of combined ratios well in excess of 100 percent.

Indemnity claim frequency was lower than 2007. The WCIRB estimated that indemnity claim frequency for the first six months of 2008 was 2 percent lower than that for the first six months of 2007. Indemnity claim frequency for the first six months of 2008 was estimated at less than one-third of its all-time high in 1991.

Average cost of an indemnity claim has increased. The WCIRB estimated that the average cost of a 2007 indemnity claim will be approximately $46,500. Researchers said this represents the second consecutive severity increase after sharp severity declines in 2004 and 2005. The preliminary accident year 2007 severity estimate, while still below the pre-reform level, is approximately 27 percent above the 2005 estimate. Researchers said both indemnity and medical average costs per claim showed significant increases in 2006 and 2007.

November 4, 2008

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