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Report: Average cost of workers’ comp claim is $65,000

Posted on 19 December 2011 by admin


Sacramento Business Journal by Kelly Johnson, Staff Writer and Social-Media Strategist

Date: Monday, December 12, 2011, 2:44pm PST

Kelly Johnson

Staff Writer and Social-Media Strategist – Sacramento Business Journal


In many measurements, the latest results of California workers’ compensation insurers aren’t too different from results a year earlier.

Even so, the data show that some results of insurers have deteriorated compared to the years right after California reformed its workers’ comp system.

The average cost of a 2010 lost-work claim will be about $65,000, according to the Workers’ Compensation Insurance Rating Bureau of California , which released its review of insurer experience through Sept. 30. That amount is comparable to the average cost, or severity, of a 2009 lost-work claim.

“Nevertheless, the 2010 average severity reflects an increase of more than 40 percent since the full implementation of the reforms in 2005,” the Rating Bureau said in the report. “Both the average indemnity and medical costs of a 2010 indemnity claim were relatively unchanged from 2009.”

Indemnity claim frequency — or the number of claims for lost work — increased only 0.1 percent in the first nine months of this year compared to the same period last year, the report said.

Employers paid an average of $2.37 per $100 of payroll for policies written during the first nine months of the year. That is about “2 percent above the average rate charged for 2010, but approximately 62 percent less than the average rate charged in the second six months of 2003,” the Rating Bureau said.

The year 2003 is considered the high water mark for workers’ comp rates before the system was overhauled.

When the books are ultimately cleared for workplace accidents that occurred in 2010, the Rating Bureau projects that insurers will pay about $8.1 billion for lost time and medical costs. “While 4 percent above the 2009 level, it is approximately 34 percent below the pre-reform high in 2002,” the report said.

Also for those accidents from 2010, the Rating Bureau predicts insurers will spend $1.30 on claims and expenses for every buck of premium they took in. That’s similar to previous year, the report said, but “the combined ratios for each of the last two years are the highest since 2001.”

One measurement that did change quite a bit in a year was the total California written premium amount, which doesn’t count deductible credits. For the first nine months of 2011, workers’ comp insurers wrote about $8.3 billion in premium. That’s about 12 percent higher than the amount reported for the same period in 2010, the Rating Bureau said.

Kelly Johnson covers retail, sports, insurance, education, nonprofits, manufacturing, social media, international trade, distributors/wholesalers and disability access for the Sacramento Business Journal.

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