The Workers Compensation Tails
By Frank Schmid
There is a dearth of public knowledge about the development patterns of mature workers compensation claims at the level of the aggregate loss triangle; this is because there are only a few loss triangles available for research that span the full lifetime of the cohort of claimants. Analysis of two very large triangles provided by SCF Arizona (indemnity) and SAIF Oregon (medical component of permanent disability claims) shows how the consumption of indemnity and medical services of a given cohort of claimants develops as this cohort ages and gradually dies off over the decades. For indemnity triangles, the decay rate of consumption correlates with the rate of mortality; for medical triangles, this rate of decay assumes a stationary, negative value after about 20 development years.
© Copyright 2012 National Council on Compensation Insurance, Inc. All rights reserved.
Keywords: Workers compensation, loss development, Markov chain Monte Carlo Simulation, reserving