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

ESTIMATING THE WORKERS COMPENSATION TAIL 601TABLE 2.4SAIF’s Indicated Paid Tail FactorsMaturity Other Workers Total Workers(Years) MPD Compensation Compensation10 2.469 1.263 1.67115 2.328 1.234 1.61325 2.054 1.129 1.45735 1.680 1.052 1.294indemnity combined). These are shown in Table 2.4 assuming anultimate mix of MPD and Other Workers Compensation of 50%for each. We selected 50% for ease of presentation because inpractice the mix would vary by state and over time.In addition to MPD tail factors, Table 2.4 also displays indicatedpaid tail factors for all other types of workers compensationlosses as well as for workers compensation in total. Most of theOther Workers Compensation tail factors reflect paid developmentfor indemnity losses of permanently disabled claimants. Asmall portion is also due to paid development on fatal cases. Theabove table puts the impact of MPD paid tails in perspectiverelative to the indicated paid tail for all WC losses (i.e., for allinjury types and for medical and indemnity combined).Appendix B provides a comparison of SAIF’s historicalPLDFs for MPD, all other workers compensation and total workerscompensation by DY. MPD is the primary reason why PLDFsfor total workers compensation decline much more slowly thangenerally expected.To gain an appreciation for the relative contribution to the totalloss reserves for a given AY of MPD versus all other workerscompensation at each of the above years of maturities, Table 2.5provides a comparison of what the reserve would be, assumingthat total ultimate losses for that AY were $100 million andassuming that 50% of ultimate losses are MPD.