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

610 ESTIMATING THE WORKERS COMPENSATION TAILThe percentage declines in prior open counts reflect the compositeeffects of three factors affecting the number of openclaims: (1) increases due to newly reported claims; (2) decreasesdue to the death of a few claimants; and (3) net changes due toother reasons (including increases due to reopened claims). After20 years of development newly reported claims become negligible,as do net claim closures. Thus, after 20 years of development,virtually all claim closures are attributable to the death ofclaimants. Consequently, changes in the number of open claimsat the end of each development year beyond 20 years can bepredicted entirely on the basis of mortality rates. And changesin the number of open claims can be estimated beyond 15 yearsvia mortality rates and inclusion of the small number of newlyreported claims and net closures for other reasons. This is subjectto fine-tuning due to the possibility that the mortality rates ofdisabled claimants might be higher than those of the general populace,although recent improvements in medical technology havereduced the influence of medical impairment on mortality rates.Table 3.4 presents an accounting of how each of the above factorsaffects the number of open MPD claims during the developmentof a typical accident year. Derivation of these assumptionsis disclosed in Appendix C.SAIF’s historical database includes the total number of closedclaims. The number of claimant deaths was estimated based onSSA mortality tables and any additional claim closures are presumedto be for other reasons. The breakdown was derived byestimating the number of claim closures due to death from theSSA mortality tables for 2000.The SSA tables were not modified by a disabled lives scalefactor because key values predicted by the model either (1)closely fit SAIF’s actual experience; or (2) underestimated actualdevelopment (e.g., DYs 40—54). Furthermore, prior actuarialinquiries into this question have been mixed regarding whethersuch a factor is justified. This is discussed in two papers in theWinter 1991 edition of the CAS Forum (“Injured Worker Mortal-