8/29/2000 1 casualty loss reserve seminar session number 7 workers compensation reserving: how do...
TRANSCRIPT
8/29/20001
Casualty Loss Reserve Seminar
Session Number 7
Workers Compensation Reserving:How Do You Slice the Cake?
September 19, 2000
Panelists: Tracy A. Ryan, FCASAssociate Actuary - Liberty Mutual Group
Mark J. Mahon, FCASConsulting Actuary - MBA, Inc.
Moderator: Timothy L. Wisecarver, FCASPresident - Pennsylvania Compensation Rating
Bureau Delaware Compensation Rating
Bureau, Inc.
8/29/20002
Why Do You Slice the Cake?
AvailabilityCredibilityHomogeneity
•Emergence Patterns•Settlement Patterns•Development Patterns•Loss Frequency•Loss Severity
Factors Affecting Decisions ConcerningData Organization
8/29/20003
Slices Related to What Item(s)Are Being Reserved
Benefits vs. Loss Adjustment
Medical Benefits vs. Indemnity Benefits
Medical-Only Benefits vs. Medical Benefits on Indemnity Claims
Vocational Rehabilitation vs. Other Indemnity Benefits
8/29/20004
Slices Related to Who Administers
The Item(s) Being ReservedBranch Office or Region
Business Unit (within an Insured or Self-Insured Risk)
Case Reserver(s)
Insurance Company
PPO/CCO Arrangements vs. “Market” Medical Providers
Producer
Reinsurance Arrangements (Assumed vs. Ceded vs. Direct Business
Self-Administered Losses vs. TPA or Other Vendor-Administered
Voluntary Market vs. Assigned Risk (Services vs. Direct Assignment)
8/29/20005
Slices Related to Rules Applicable
to the Item(s) Being Reserved
•Deductibles (Large vs. Small vs. None)
•Jurisdiction (i.e., USL&HW, FELA, State Act, etc.)
•State of Coverage (for State Act Benefits)
8/29/20006
Slices Related to Special Features
of the Insured(s)
•Industry Group (or Classification(s) )
•Large Accounts vs. Other Policies
•Anomalous Accounts vs. Other Policies
•Loss-Rated vs. Guaranteed Cost Policies
•Participating vs. Non-Participating Policies
8/29/20007
Slices Related to Known or Anticipated Features of Item(s)
Being Reserved
•Large or Catastrophic Losses vs. Other Claims
•Layer of Loss
•Open Cases vs. Closed Cases
•Traumatic vs. Occupational Disease
•Type of Injury (Death, Permanent/Temporary, Total/Partial, Medical Only)
Workers Compensation Reserving How Do You Slice the Cake?
Mark J. Mahon, FCAS, MAAA
MBA, Inc.
8/29/20009
It’s Easy to Want the Data - Receiving It Is Not So Easy
To Start - Keep Things Simple Follow the Client’s Operations Why Do You Want the Data? Time Consuming and Expensive
8/29/200010
Traumatic vs. OccupationalDisease (Black Lung)
Coal Mine Compensation Rating Bureau of Pennsylvania.
8/29/200011
Traumatic vs. Occupational Disease (Black Lung)
Comparison of OD to Traumatic– Cumulative– Long Report Time– Claims take time to Adjudicate– Lifetime Benefits– Low Frequency/High Severity
8/29/200012
The OD System
Frequency times Severity.
8/29/200013
The OD System
IBNR Claims– Uses Typical Accident Year Triangles– Claims assigned to Year based on Last Date
of Exposure– Claim Count Development used to estimate
IBNR Claims
8/29/200014
OD Frequency
Three Pieces– Known Claimants Receiving Benefits at the
valuation date (Awarded Claims)– An Estimate of Pending Claims that will be
Awarded– An Estimate of IBNR Claims that will be
Awarded
8/29/200015
The OD System
Awarded Claims
REPORTED DATA TOTAL
TOTAL AW ARDED AWARDED AWARDED
YEAR REPORTED AWARDED PENDING DENIED PENDING IBNR IBNR CLAIMS
1989 20 5 4 11 0.428 2.532 0.271 5.699
1990 28 1 2 25 0.214 2.819 0.302 1.516
1991 27 2 3 22 0.321 2.688 0.288 2.609
1992 20 2 1 17 0.107 2.990 0.320 2.427
1993 8 0 1 7 0.107 3.253 0.348 0.455
1994 8 0 2 6 0.214 3.788 0.405 0.619
1995 10 2 2 6 0.214 4.031 0.431 2.645
1996 5 0 0 5 0.000 5.067 0.542 0.542
1997 2 0 1 1 0.107 5.745 0.615 0.722
1998 0 0 0 0 0.000 7.573 0.810 0.810
TOTAL 128 12 16 100 1.712 40.485 4.332 18.044
Award Ratio: Awarded/(Awarded plus Debied) = 12/(12+100) = 10.7%
8/29/200016
OD Severity
Life Tables Lifetime Benefits Claimant’s Age Annual Benefits Marital Status Escalation (State - No, Federal- Yes)
8/29/200017
OD Severity
Life Tables used to Model Future Benefits
M o rta lity P ro b a b ility Future Future
M ine r's Ta b le o f Benefit Exp ec ted
A g e Liv es P a ym ent A m o unt C O LA P a ym ent
60 46,524 0.9884 $5,935 1.000 $5,866
61 45,449 0.9651 5,935 1.030 5,900
62 44,355 0.9414 5,935 1.061 5,927
63 43,238 0.9171 5,935 1.093 5,948
64 42,096 0.8923 5,935 1.126 5,960
: : : : : :
105 39 0.0007 5,935 3.782 15
106 25 0.0004 5,935 3.895 10
107 16 0.0003 5,935 4.012 7
108 10 0.0002 5,935 4.132 4
109 6 0.0001 5,935 4.256 2
110 0 0.0000 5,935 4.384 0
To ta l 149,977
8/29/200018
OD Severity
Act 57– Only Claims Filed After Mid 1996– WC Benefits Reduced for Social Security– WC Benefits Reduced for Pensions– AMA Guidelines Made it Harder To Achieve
PT Disability Status
8/29/200019
The OD Reserve Three Pieces
>Known Awarded Claims: Sum of Each Claimant’s future payments from
severity model>Pending Claims: Pending Claims x Award Ratio x Average Severity of
Pending Claims>IBNR Claims: IBNR Claims x Award Ratio x Average Severity of
Awarded and Pending Claims
8/29/200020
OD System - Concluding Remarks
Lifetime Payments/Long Tail Relatively Few Claims Parallels Actual Process Reviewed by Interested Parties Expensive Is This Really the Only Way to Make
Estimates?
8/29/200021
Traumatic - Indemnity vs. Medical
Very Common Split Also Breakdown Medical into Medical Only and
Medical on Indemnity Different
– Development– Inflation– Law Changes
8/29/200022
Tail Factor -Inverse Power Curve
Fo rm : ld f = 1 + a *( tim e+c )^(b )
Tra nsfo rm a t io n: ln (Ld f-1) = ln (a ) + b *ln(t im e+c ) Fitted Fitted
Pe rio d Ld f t im e c ln(Ld f-1) ln (tim e+c) D a ta p o ints: 12:24 to 60-72 ln(Ld f-1) Ld f
12:24 1.902 1 3 -0.103 1.386 Reg ressio n Sta tistic s -0.248 1.781
24:36 1.290 2 3 -1.238 1.609 R-Sq ua re 96.4% -0.955 1.385
36:48 1.233 3 3 -1.457 1.792 O b se rv a tio ns 5 -1.533 1.216
48:60 1.144 4 3 -1.938 1.946 a 4.147 -2.021 1.133
60:72 1.085 5 3 -2.465 2.079 b -3.170 -2.445 1.087
72:84 6 3 2.197 -2.818 1.060
84:96 7 3 2.303 -3.152 1.043
96:108 8 3 2.398 -3.454 1.032
108:120 9 3 2.485 -3.730 1.024
120:132 10 3 2.565 -3.983 1.019
: : : : : :
240:252 20 3 3.135 -5.792 1.003
P o ssib le Ta il Fa c to rs: 6-10 1.189
6-15 1.251
6-20 1.277
8/29/200023
Tail Factor -Relate to Larger Body
A . Re la tio nsh ip o f C o m p a ny Z to Ind ustry
Lo ss D ev e lo p m ent Fa c to rs Re la t io nsh ip
C o m p a ny Z Insura nc e Ind ustry C o m p a ny Z
P e rio d Fa c to r P e rio d Fa c to r to Ind ustry
12-24 1.902 12-24 1.351 140.8%
24-36 1.290 24-36 1.091 118.2%
36-48 1.233 36-48 1.040 118.6%
48-60 1.144 48-60 1.024 111.7%
60-72 1.085 60-72 1.017 106.7%
72-Ult 72-Ult 1.076
A v era g e o f La test 3: 112.3%
Trend ed : 104.5%
B. Po ssib le Ta il Fa c to rs C o m p a ny Z
Ind ust ry Ta il Re la tio nsh ip Ta il
A v e ra g e -1 1.076 112.3% 1.210
A v era g e -2 1.076 104.5% 1.120
8/29/200024
Tail Factor -Decay Factor
Lo ss Dev e lo p . Fa c to rs Dec a y
P e rio d Fa c to r Fa c to r - 1.0 Fa c to r
A c tua l 12-24 1.902 0.902
24-36 1.290 0.290 32.2%
36-48 1.233 0.233 80.3%
48-60 1.144 0.144 61.8%
60-72 1.085 0.085 59.0%
A v era g e : 58.3%
Med ia n: 60.4%
Se lec ted : 60.0%
P ro jec ted 72-84 1.051 0.0510 60.0%
84-96 1.031 0.0306 60.0%
96-108 1.018 0.0184 60.1%
108-120 1.011 0.0110 59.8%
120-132 1.007 0.0066 60.0%
132:144 1.004 0.0040 60.6%
144:156 1.002 0.0024 60.0%
156:168 1.001 0.0014 58.3%
168:180 1.001 0.0008 57.1%
Ta il Fa c to r - 72 to Ult 1.132
8/29/200025
Traumatic Losses By Injury Type
Death, Permanent Total, Permanent Partial and Temporary Claims
Proportion of Losses by Injury Type– Act 57 Impacts Largest Claims – Severity Subsequent to Law Change should
be Smaller
8/29/200026
Traumatic Losses By Injury Type
Act 57 Also made it Easier to Settle Claims – Fewer Claims Being Reported as PT – Retroactive - Existing PT’s Settled and
Reclassified– Incurred Loss Triangles Double Count
Impact of Settlements– Paid Triangles Overstate Impact
8/29/200027
Traumatic Losses By Injury Type
Permanent Total Claim Count DevelopmentA c c id ent Yea r
Rep o rt 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
12 m o s. 1 2 2 3 1 3 2 4 2 2
24 m o s. 4 5 4 5 3 6 5 5 6
36 m o s. 8 9 12 7 8 7 9 10
48 m o s. 13 14 13 9 10 12 13
60 m o s. 15 16 18 10 12 12
72 m o s. 15 17 19 10 13
86 m o s. 16 16 19 10
96 m o s. 16 17 19
108 m o s. 16 17
120 m o s. 16
8/29/200028
Traumatic Losses By Injury Type
PT Count Development after Act 57
A c c id ent Yea r
Rep o rt 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
12 m o s. 1 2 2 3 1 3 2 0 0 0
24 m o s. 4 5 4 5 3 6 1 0 1
36 m o s. 8 9 12 7 8 7 1 0
48 m o s. 13 14 13 9 8 7 2
60 m o s. 15 16 18 10 8 6
72 m o s. 15 17 17 9 6
86 m o s. 16 16 15 8
96 m o s. 14 12 14
108 m o s. 12 10
120 m o s. 11
8/29/200029
Traumatic Losses By Injury Type
Safety Program Impact – Drop in Number of Injuries– Shift to less Severe Accidents
8/29/200030
Losses in Higher Layers
Be Careful - Reserves in Higher Layers may be Inadequate
Loss Development Under Estimates Higher Layers in Most Recent AY– Immature years don’t yet have any big losses– Change in claims handling – Historically there are no Higher Layer Losses in
layer but because of new severe classes or inflation new losses are expected
8/29/200031
Losses in Higher Layers
Latest Years’ Lower than HistoricalP o lic y P e rio d
90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00
Lo sses Lim ite d to $250,000
Ultim a te 9,735 14,422 12,928 11,955 14,434 11,442 6,006 11,462 7,185 8,152
G ro ss Lo sse s
Ultim a te 10,995 15,410 14,141 12,907 15,822 11,862 6,697 12,231 7,615 8,542
Ra tio o f G ro ss to $250k
12.9% 6.9% 9.4% 8.0% 9.6% 3.7% 11.5% 6.7% 6.0% 4.8%
Fiv e Yea r Do lla r W e ig hte d A v e ra g e : 9.1% 9.1% 9.1% 9.1% 9.1%
Se lec ted Ra t io : 6.4% 11.5% 9.1% 9.1% 9.1%
Resta ted G ro ss Ultim a te Lo sse s: 12,175 6,697 12,510 7,842 8,897
Lo sses Lim ited to $250k tim es [Se le c ted Ra tio p lus 1.0]
8/29/200032
Losses in Higher Layers
Immature Years has No Losses
P o lic y P e rio d
90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00
C a se Inc urred Lo sse s XS $250,000
1,100 840 1,000 730 700 240 350 320 0 0
Exc ess Lo ss Dev e lo p m ent Fa c to r
1.145 1.176 1.213 1.304 1.411 1.750 1.974 2.403 2.900 4.500
Ultim a te Lo sses XS $250,000
1,260 988 1,213 952 988 420 691 769 0 0
Resta ted Ultim a te Lo ssses ( Fiv e Yea r A v e ra g e ): 800 800
8/29/200033
Losses in Higher Layers
Use Industry Statistics to Fill-in Excess Losses– Payroll x Loss Cost x Excess Loss Factor– As AY matures rely on actual data more and
more For Insurers Do Gross, Ceded and Net
Separately
8/29/200034
Losses By Business Segment
Many Self-Insureds have Different Operating Units– E.g., Construction vs. Shipbuilding– Financial Data Already Split– Usually Easy to get Actuarial Data as
Coding already there
8/29/200035
Losses By Business Segment
Many Self-Insureds have Different Operating Units– E.g., Construction vs. Shipbuilding– Financial Data Already Split– Usually Easy to get Actuarial Data as
Coding already there Data by Jurisdiction
– USL&H Benefits Higher than State Benefits
8/29/200036
Combining Data Increases Credibility for Companies with Sparse Data Provides a Guide to Overall Level Use Combined Data as Minimum as usually the Sum
of the Slices are greater than the Total– Less Variation in Total – Smaller Slice with Tail muted by Larger Slice
without Tail– Shifting Losses to Longer Tail Slice
8/29/200037
Keeping Score
Purpose of Slices - Improve Reserve Estimation Accuracy
Keep Tabs on your Estimates - Keep A Scorecard
8/29/200038
Fisc a l Ultim a te Lo sses V a lued a s o f: C ha ng es
Po lic y 3-31-97 to 3-31-98 to 3-31-99 to
Yea r 3-31-97 3-31-98 3-31-99 3-31-00 3-31-98 3-31-99 3-31-00
1992-93 12,399 12,100 12,600 11,928 (299) 500 (672)
1993-94 11,355 11,800 11,800 12,000 445 0 200
1994-95 13,027 13,500 13,700 14,000 473 200 300
1995-96 11,061 10,300 10,900 11,100 (761) 600 200
1996-97 6,563 6,500 5,900 6,000 (63) (600) 100
Sub to ta l 54,405 54,200 54,900 55,028 (205) 700 128
1997-98 9,400 f 9,400 10,600 10,800 0 1,200 200
1998-99 - - 8,450 f 7,500 7,200 - - (950) (300)
1999-00 - - - - 7,400 f 7,700 - - - - 300
2000-01 - - - - - - 7,800 f - - - - - -
Sub to ta l 9,400 17,850 25,500 33,500 0 250 200
To ta l 63,805 72,050 80,400 88,528 (205) 950 328
Keeping Score
Workers Compensation Reserving How Do You Slice the Cake?
Tracy A. Ryan, FCAS, MAAA
Liberty Mutual Group
8/29/200040
Large Dollar Deductibles
Primary vs. Excess
Unique Accounts
Industry Segments
IBNR Rule of Thumb
Workers Compensation Reserving
8/29/200041
10
15
20
25
30
35
40
90 91 92 93 94 95 96 97 98p
Calendar Year
$ B
illio
ns
p Preliminary
Impact ofDeductibles
Workers CompensationLarge Dollar Deductibles
Net Written Premium
8/29/200042
Workers CompensationLarge Dollar Deductibles
Loss Ratio
FirstDolla
r
Large DollarDeductible
Loss
$ 75
$ 15Expens
e $
25
$ 23Premiu
m
$100
$ 38
Loss Ratio
75%
40%
(1)
(2)
8/29/200043
Workers CompensationLarge Dollar Deductibles
ExampleUlt.Loss(1)
MigrationRate(2)
Ground-upRept. Pattern
(3)
Excess Rept.Pattern
(4)1994 $1,000 10% 91% 22%
1995 $1,000 25% 89% 20%
1996 $1,000 40% 87% 17%
1997 $1,000 45% 82% 14%
1998 $1,000 50% 67% 10%
*Assume deductible level remains the same each year.*Average deductible implies excess loss is 20% of ground-up loss.*Numbers are illustrative only.
8/29/200044
Workers CompensationLarge Dollar Deductibles
Example
12(1)
24(2)
36(3)
48(4)
60(5)
Ult. Loss(6)
1994 $670 $820 $870 $890 $910 $1,000
1995 $670 $820 $870 $890 $1,000
1996 $670 $820 $870 $1,000
1997 $670 $820 $1,000
1998 $670 $1,000
Total incurred if all remains as first dollar business
8/29/200045
Workers CompensationLarge Dollar Deductibles
Example
Total first dollar + LDD incurred
12(1)
24(2)
36(3)
48(4)
60(5)
Ult. Loss(6)
1994 $605 $741 $786 $805 $823 $920
1995 $508 $622 $661 $678 $800
1996 $410 $503 $536 $680
1997 $378 $464 $640
1998 $345 $600
8/29/200046
Incurred @12/31/98
(1)
% Rept. @12/31/98
(2)
ImpliedUltimate
(3)
ActualUltimate
(4)
ImpliedReserve
(5)
ActualReserve
(6)1994 $823 91% $904 $920 $81 $97
1995 $678 89% $762 $800 $84 $122
1996 $536 87% $616 $680 $80 $144
1997 $464 82% $566 $640 $102 $176
1998 $345 67% $515 $600 $170 $255
Total $3,363 $3,640 $517 $794
Workers CompensationLarge Dollar Deductibles
Example
8/29/200047
Workers CompensationLarge Dollar Deductibles
How to Calculate Ultimate Loss?
Develop losses net of deductible
Develop gross losses and apply a loss
elimination ratio
Apply an expected loss ratio to premium
Use a Bornhuetter-Ferguson approach
Sounds Easy … Right??
8/29/200048
Workers CompensationLarge Dollar Deductibles
How to Calculate Ultimate Loss? Develop Losses Net of Deductible
– Highly Leveraged Loss Development Factors– Changing Retentions Over Time
Develop Gross Losses & Apply a Loss Elimination Ratio– Selecting the Loss Elimination Ratio– Changing Retentions Over Time
Apply an expected loss ratio to premium– Selecting the Expected Loss Ratio
Use a Bornhuetter-Ferguson approach – See above ...
8/29/200049
Workers CompensationLarge Dollar Deductibles
Educate your customer (risk manager,
underwriter, internal management, etc.) on the
peculiarities of net deductible loss
- Severity of Excess Claims
- Reporting and Payout Pattern of Excess Claims
- Potential for Catastrophic Claims
- Leveraged Impact of Inflation
4/19/20008/29/2000
Liberty Mutual WC Claims Greater than $500,000
Percent of Total Reported
Claims Dollars
0.05% 9%
4/19/20008/29/2000
NCCI DataWorkers Compensation
Serious Claims vs All Claims
Claim Counts $ Loss
All Claims 250,745 $1,358m
Serious Injuries 5,828 $ 726m
% Serious 2% 53%
4/19/20008/29/2000
Liberty Mutual’s Oldest Open WC Claim
Date of Accident
State
Description
Injury Type
Current Age
Still Paying
September 10, 1937
New Jersey
Bilateral Hand Amputations
Permanent Total
91 Years Old
Weekly Compensation
4/19/20008/29/2000
Acc After After AfterYears 5 Years 10 Years 15 Years1980-1989 1.0 2.1 3.3
For every 1 claim in excess of $500,000 as of 5 years, there will be 3.3 claims in excess of $500,000 as of 15 years.
Workers Compensation Claims Greater than $500,000
4/19/20008/29/2000
WC Excess Payout Pattern
Retention Approx. Years to Pay Half of Ultimate
$ 0 2.5
$100k 7
$250k 15
$500k 19
$1m 25
4/19/20008/29/2000
How Big Can a WC Claim Be?
A 25 year old quadriplegic
Indemnity benefits = $23,400 per year
Medical costs = $125,000 per year
How much will this claim ultimately cost?
4/19/20008/29/2000
How Big Can a WC Claim Be?YearsUntil Medical InflationDeath 0% 5% 7% 9%
20 $3.0 $4.6 $5.6 $6.9
35 $5.2 $12.1 $18.1 $27.8 50 $7.4 $27.3 $52.0 $103.0
65 $9.6 $58.6 $144.8 $376.3
4/19/20008/29/2000
The Impact of Inflation on Excess Pricing
The customer has a $250,000 LDD policy Expect 1 claim each yearExpected Loss = $360,000Excess loss = $110,000.
Excess premium = $55,000.
Assuming the customer does not change their retention, how much must we charge for next year’s policy if we know losses are growing at 3% per year?
4/19/20008/29/2000
The Impact of Inflation on Excess Pricing
We have to charge 10% more next year. Why?
Expected Loss = $370,800 ($360,000 * 1.03)Excess loss = $120,800.Excess premium = $60,400.
$60,400 / $55,000 = 1.10
8/29/200059
Workers CompensationUnique Accounts
@ 6 months
Claim Closure +17 points
Average Open -36%
Average Paid -32%
To understand how a single large account can impact results, you must look at the diagnostics of the account versus the rest of the book:
8/29/200060
Workers CompensationIndustry Segments
Industry segments studied were contracting, goods and services, manufacturing, office and clerical, and miscellaneous
Over a five year period:-Medical severity increase ranges from 2% to 16%-Indemnity severity change ranges from -2% to 9%
8/29/200061
Workers CompensationBuyouts
Development Expenses Taxes Investment Income Risk charge/profit
8/29/200062
Workers CompensationBuyouts
Policy year 1994
Incurred loss @ 12/99 = $2,500
Paid loss @ 12/99 = $2,450
Ultimate incurred estimate = $2,725
Ultimate paid estimate = $3,185
Average ultimate = $2,955
8/29/200063
Question:
In providing an actuarial reserve analysis to a large national account, the risk manager asked the question for workers compensation: “For every dollar of aggregate case reserve, how much IBNR should I expect?” Answer:
For WC, aggregate IBNR reserves should vary between 80% and 90% of outstanding aggregate case reserves.
Workers CompensationRule of Thumb
8/29/200064
Based on industry data and the following formula:
IBNR Reserve = (Ultimate Loss - Incurred Loss) Case Reserve (Incurred Loss - Paid Loss)
= (100% - % Incurred) (% Incurred - % Paid)
= (1.0 - 1/Incurred CDF)
(1/Incurred CDF - 1/Paid CDF)
Workers CompensationRule of Thumb
8/29/200065
Workers CompensationRule of thumb
Amount of IBNR loss as a percent of case reserveUsing 2 year patterns Using 5 year patterns
MaturityIncurred
CDFPaid CDF
IBNR as a % of case
Incurred CDF
Paid CDF
IBNR as a % of case Selected
12 1.596 4.245 95.5% 1.610 4.376 96.5% 95%24 1.263 2.039 69.1% 1.273 2.084 70.2% 70%36 1.187 1.630 68.8% 1.189 1.642 68.5% 70%48 1.157 1.463 75.1% 1.153 1.458 73.1% 75%60 1.140 1.372 82.8% 1.133 1.360 79.7% 80%72 1.130 1.315 92.4% 1.121 1.300 87.9% 90%84 1.121 1.277 99.0% 1.111 1.260 93.9% 95%96 1.112 1.248 102.8% 1.103 1.230 99.8% 100%
Note: Ratio = (1.00 - 1/Incd CDF)
(1/Incd CDF - 1/Paid CDF)
8/29/200066
Factors Impacting Ratio:
Mix of years - Assumed that case reserves decrease as maturity increases.
Mix of states - Used only countrywide development factors.
Development pattern - Specific company patterns may differ from NCCI pattern.
Workers CompensationRule of Thumb