Travelers 2005 Annual Report Download - page 128

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Changes in the underlying court system
Changes in case law
Litigation trends
Frequency of claims with payment capped by policy limits
Change in average severity of accidents, or proportion of severe accidents
Subrogation opportunities
Changes in claim handlingphilosophies
Frequency of visits to health providers
Number of medical procedures given during visits to health providers
Types of health providers used
Types of medical treatments received
Changes in cost of medical treatments
Degree of patient responsiveness to treatment
Commercial automobile book of business risk factors
Changes in policy provisions (e.g., deductibles, policy limits, endorsements, etc.)
Changes in mix of insured vehicles (e.g., long haul trucks versus local and smaller vehicles, fleet risks versus
non-fleets)
Changes in underwriting standards
Workers’ Compensation
Workers’ compensation is generally considered a longtail coverage, as it takes a relatively long period
of time tofinalize claims from a given accident year. While certain payments such as initial medical
treatment or temporary wage replacement for the injured worker are made quickly, some other payments
are made over the course of several years, such as awards for permanent partial injuries. In addition, some
payments can run as long as the injured worker’s life, such as permanent disability benefits and on-going
medical care. Despite the possibility of long payment tails, the reporting lags are generally short,
settlements are generally not complex, and most of the liability can be considered high frequency with
moderate severity. The largest reserve risk generally comes from the low frequency,high severity claims
providing lifetime coverage for medical expense arising from a worker’s injury. Overall, the claim liabilities
for this line create a somewhat greater than moderate estimation risk.
Workers’ compensation reserves are typically analyzed in three components: indemnity losses, medical
losses and claim adjustment expenses.