Reinsurance News

COVID-19 tail highlighted by surge in workers’ comp claims in California

2nd February 2021 - Author: Luke Gallin

The projected ultimate count for all COVID-19 workers’ compensation (WC) claims for accident year 2020 in the State of California stands at almost 118,000, according to analysis by the California Workers’ Compensation Institute (CWCI).

covid-19-coronavirus-pandemicIn December 2020, the monthly count of COVID-19 job injury claims reported to the California Division of Workers’ Compensation (DWC) reached a new high of 32,549 cases, taking the total number of claims for the year to 103,712.

According to analysis by the CWCI, this accounts for more than one out of six WC claims with a 2020 injury date. And, with claims still being filed the CWCI expects the ultimate claims count for December to reach 43,290, taking the accident year 2020 total to a huge 117,989 COVID-19 claims.

“The latest figures, based on claims reported to the DWC as of January 25, show that more than half (50.8%) of all workers’ compensation claims in California last month were for COVID-19, up sharply from 29.3% in November, which was the previous high-water mark for the year,” explain analysts.

As of February 1st, 2021, publicly reported COVID-19 pandemic-related losses, IBNR reserves and estimates from insurance and reinsurance companies, stands at approximately $30.4 billion, although this figure is expected to rise in the coming days and weeks as more carriers report their Q4 financials.

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Of course, losses from short-tail contingency lines such as event cancellation are simpler to reserve for and are generally settled quickly, but as our readers will be aware, WC claims can have a relatively long-tail so exposures in a given period can arise for many subsequent years for carriers.

As data from the CWCI shows, COVID-19 WC claims appear widespread and are certainly ongoing, suggesting that the industry will find a tail to the pandemic, in terms of claims being filed.

It’s also important to consider the potential implications of so called “long-COVID” as there could be workers who only realise they are suffering from the virus months or even years after the initial infection, which could push the tail out even further.

Showing just how prevalent COVID-19 WC claims are in California, data shows that even with new claims continuing to be filed, the surge in COVID-19 cases already recorded in November and December have pushed the overall WC claims count for Q4 2020 to 166,587, which is reportedly 3.2% higher than the same period in 2019 and the first time that accident year 2020 quarterly claim volume surpassed the prior year figure.

“The distribution by industry shows the health care sector and public safety/government workers continue to account for more COVID-19 claims than other sectors, though their share of the COVID-19 claims showed little change over the last three months of the year, while retail workers’ share of the claims jumped from 8.7% in October to 13.1% in December,” explains the CWCI.

Adding: “The geographic distribution of the COVID-19 claims also shifted in the last quarter of 2020, as the Inland Empire/Orange County saw its share climb from 24.5% in October to 28.8% in December, while over the same 3-month span Los Angeles County’s share increased from 24.2% to 30.1%.  In contrast, the Central Valley dropped from 18.9% of the COVID-19 claims in October to 15.7% in December, while at the same time, the Bay Area’s share dropped from 17.1% to 12.2%.”

In light of the surge in COVID-19 WC claims in December in California, it’s plausible that other parts of the country also witnessed an increase in claims as the year came to a close.

It’s clearly going to be quite some time before the ultimate hit to the insurance and reinsurance industry from the ongoing COVID-19 pandemic is fully understood; something exacerbated by the longer tail inherent in the WC arena and subsequent uncertainty.

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