(c) 2016 Jon L Gelman, All Rights Reserved.

Saturday, January 17, 2015

California: WCIRB Report Shows Continued Increase in Claim Frequency

The WCIRB has released an update to its Analysis of Changes in Indemnity Claim Frequency report which was originally published in 2012 and last updated in December 2013. In prior reports, WCIRB researchers explored potential causes for the increases in claim frequency in California that have persisted since 2010 and that differ from the claim frequency experience of other states.

Prior frequency reports have identified a number of factors influencing claim frequency including increases in cumulative injury claims, increases in smaller non-cumulative injury claims that may have been reported as medical-only in the past, increases in the proportion of indemnity claims relative to total claims, and increases in late-reported indemnity claims and the proportion of medical-only claims that later transition to indemnity.

In this latest update, WCIRB researchers studied the influencing factors driving recent claim frequency based on the most up-to-date data available. The WCIRB’s principal findings include:

  • Unlike in most other states over the last several years, California indemnity claim frequency has continued to increase as WCIRB data currently indicates increases of 3.2%, 3.9% and 0.9% in 2012, 2013, and 2014, respectively. 
  • The number of late reported indemnity claims continues to increase, whereas the percentage of medical only claims reported after 18 months has generally remained stable since 2007. 
  • The level of cumulative injury claims has continued to increase. Approximately 13% of indemnity claims are estimated to involve a cumulative injury in 2013 compared to approximately 8% in the 2005 to 2007 period. 
  • The growth in cumulative injury claims beginning in 2009 has been concentrated in claims involving more serious injuries and multiple injured body parts. Both the proportion of cumulative injury claims involving indemnity benefits and the proportion involving injuries to multiple body parts have increased significantly since 2010. 
Based on WCIRB surveys of cumulative injury claims, both the proportion of cumulative injury claims involving multiple insurers and the proportion involving attorney representation has increased in recent years. In addition, approximately two-thirds of surveyed claims were initially denied in part or in whole by the insurer and approximately 40% of claims, despite long-standing statutory limitation on the compensability of post-termination claims, were reported post-termination.

Shifts to a less hazardous composition of industries in California (“industrial mix”) have historically driven claim frequency downward. The recent economic recovery in higher hazard industries such as construction and manufacturing has had the opposite impact. In 2013, rather than dampening claim frequency, shifting industrial mix is increasing claim frequency by approximately 1%.

The 2010 increase in frequency was greatest in industries that were most impacted by the recession (e.g. construction and real estate). Since 2010, relativities for higher-frequency industries such as agriculture, construction, and entertainment have increased while those for the lower-frequency industries such as real estate, professional services, and finance have declined.

The 2010 indemnity claim frequency increase was generally experienced across all California regions. Since that time, the increases have been concentrated in the Los Angeles area. Indemnity claim frequency increased an estimated 9% in the Los Angeles Basin region from 2010 to 2013 while, similar to the pattern shown in many other states, other California regions showed modest declines. By comparison, indemnity claim frequency in the Bay Area declined by 7% over the same period. The Los Angeles area also has experienced significantly higher numbers of cumulative injury claims and claims involving multiple body parts than other regions of California.

As the economy recovers, newer workers enter the system and are often more likely to be injured on the job than more experienced workers. The proportion of injured workers with less than 2 years of experience at their current job has grown by 8% from 2010 to 2014, suggesting the economic recovery is a significant driver of recent claim frequency increases.

The full Analysis of Changes in Indemnity Claim Frequency—January 2015 Update Report is available in the Research and Analysis section of the WCIRB website.