PROCEEDINGS May 15, 16, 17, 18, 2005 - Casualty Actuarial Society

594 ESTIMATING THE WORKERS COMPENSATION TAIL² The above effects on MPD will cause corresponding upwardtrends in paid tails and incremental PLDFs for all workerscompensation losses in the aggregate.Unless the effects of downward trends in mortality rates areincorporated into a workers compensation reserve analysis, theresulting reserve estimates will be low when numerous AYs areinvolved and the retention is very high.We believe that the most appropriate approach to estimatinggross workers compensation loss reserves is to separately evaluateMPD loss reserves by one or more of the methods presentedin this paper. Lacking separate MPD loss experience, the staticmortality and trended mortality models and the Mueller IncrementalTail method can be applied satisfactorily to total medicalloss experience for DYs 20 and higher, since virtually all medicalpayments are MPD payments at such maturities.There is an additional reason to utilize the methods presentedin this paper instead of the standard PLDF method. In general,legislated benefit changes tend to have a much greater impacton the magnitude and duration of short-term payments than onlifetime payments. When a PLDF method is used, it assumes thatthe relative magnitude of short-term and lifetime payments foreach AY is relatively constant. Benefit changes can significantlychange this mix, causing distortions in projections of remaininglifetime payments based on PLDFs. In contrast, projectionsof future lifetime payments based on the incremental paid toprior open claim method should be comparatively independentof shifts in the relative magnitude of short-term payments.2. USINGPRIORINCREMENTALPAIDDATATOEXTENDTHEPLDF TRIANGLEFigure 2.1 provides a graphic summary of the available portionsof the incremental MPD payments experience of the SAIFCorporation. A complete triangle of MPD payments exists for