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.