June 21, 2020

WCIRB Examines COVID-19’s Impact on California Comp

The Workers’ Compensation Insurance Rating Bureau (WCIRB) of California published Impact of Economic Downturn on California’s Workers’ Compensation Claim Frequency, a report documenting how COVID-19’s significant economic impacts have affected workers’ comp.

An estimated 4.3 million first-time unemployment claims were filed in the first 10 weeks of the pandemic, compromising a loss of over 20% of California’s total workforce. For this study the WCIRB analyzed historical impacts of economic cycles between 1961 and 2017 on workers’ comp claim frequency and provided forecasts of claim frequency based on COVID-19 impacts.

Key highlights of the WCIRB’s findings include:

  • Between 1961 and 2017, overall claim frequency decreased modestly more during years of economic recession than during years of expansion. The modest decline during economic downturns was partly due to cumulative trauma (CT) claims, which, unlike other claims, often increased during downturns
  • For industry sectors that were hit the hardest during the 2001 recession and the Great Recession, claim frequency tended to fall along with job losses or fall faster during economic downturns compared to economic expansions
  • Based on the post-COVID-19 national unemployment rate for April 2020 of 14.7%, the WCIRB’s econometric model projects indemnity claim frequency to decline by 14% in 2020
  • Since 2012, about 25 post-termination claims (most are CT claims) have been filed for every 1,000 jobs lost. If only 50% of the rate of post-termination claims is applied to the 4.3 million Californians who have lost jobs, about 54,000 post termination claims could be filed over the next year, increasing statewide indemnity claim frequency by approximately 25%
  • Estimated frequency increase from COVID-19 claims ranges from 14% over a four-month period of a rebuttable presumption applied to all workers directed to work outside of home to 42% over an annual period of a conclusive presumption to all essential workers
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