Travelers 2015 Annual Report Download - page 145

Medical risk factors
• Changes in the cost of medical treatments (including prescription drugs) and underlying fee
schedules (‘‘inflation’’)
• Frequency of visits to health providers
• Number of medical procedures given during visits to health providers
• Types of health providers used
• Type of medical treatments received
• Use of preferred provider networks and other medical cost containment practices
• Availability of new medical processes and equipment
• Changes in the use of pharmaceutical drugs, including drugs for pain management
• Degree of patient responsiveness to treatment
General workers’ compensation risk factors
• Frequency of reopening claims previously closed
• Mortality trends of injured workers with lifetime benefits and medical treatment
• Changes in statutory benefits
• Degree of cost shifting between workers’ compensation and health insurance, including
Medicare, and the impact, if any, of the Affordable Care Act
Workers’ compensation book of business risk factors
• Product mix
• Injury type mix
• Changes in underwriting standards
Unanticipated changes in risk factors can affect reserves. As an indicator of the causal effect that a
change in one or more risk factors could have on reserves for workers’ compensation, a 1% increase
(decrease) in incremental paid loss development for each future calendar year could result in a 1.3%
increase (decrease) in claims and claim adjustment expense reserves.
Historically, the one-year change in the reserve estimate for this product line over the last nine
years has varied from 2% to 1% (averaging 1%) for the Company, and from 2 to 1%
(averaging 1%) for the industry overall. The Company’s year-to-year changes are driven by, and are
based on, observed events during the year. The Company believes that its range of historical outcomes
is illustrative of reasonably possible one-year changes in reserve estimates for this product line.
Workers’ compensation reserves represent approximately 39% of the Company’s total claims and claim
adjustment expense reserves.
The Company’s change in reserve estimate for this product line was 1% for 2015, 0% for 2014
and 1% for 2013. The 2015 change primarily reflected better than expected loss experience for
accident years 2006 and prior.
Fidelity and Surety
Fidelity is generally considered a short tail coverage. It takes a relatively short period of time to
finalize and settle most fidelity claims. The volatility of fidelity reserves is generally related to the type
of business of the insured, the size and complexity of the insured’s business operations, amount of
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