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Measuring Loss Development

Want to find out how well an insurer estimated its workers’ compensation losses in a given state over time?  Or, compare several insurers’ workers compensation loss development in a given state?  As they say, “Good luck with that.”  Insurers aren’t required to report their loss development by-line, by-state.  The annual statement, “Statutory Page 14,” does shows by-line, by-state results, but only for the immediately preceding year in question.  So, it does not show loss development.  “Schedule P” of the insurer’s annual report does show loss development by-line, but only on a national basis, not by-state. 

The rationale seems to be that regulators are mostly concerned with the insurer’s overall financial condition, which isn’t an individual state issue.  But this data- reporting limitation can wreak havoc when, as in California during the years following the 2003 reforms, loss development estimates turn out -- in retrospect -- to have been much higher than expected.  

Published: Thursday, March 13, 2014
Last updated: Tuesday, September 9, 2014
By: Arthur J. Levine, Ph.D.

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