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

ESTIMATING THE WORKERS COMPENSATION TAIL 619² The number of ultimate reported claims for every accidentyear, from 1966 through 2002, is held at a constant level of5,000 per year.² Claim reporting and closure patterns for SAIF’s PD claimantsover the past 10 calendar years served as the basis for thesekey assumptions in order to make the model as realistic aspossible.By designing a model where claimant mortality rates are theonly thing that changes from accident year to accident year, theeffects of mortality trends can be clearly seen. Details of themodel are presented in Appendices C and D.Projections of the number of open claims were derived fromthe heuristic model for each accident year from 1966 through2002 at the end of every development year from the first tothe 80th. As noted above, each accident year was assumed tohave 5,000 ultimate reported claims. Claim closure patterns, forreasons other than death of the claimant, were held constant forall accident years. The only thing that varied from accident yearto accident year in the model was the number of claims closeddue to death. In this way the effects of mortality trends on thenumber of open claims at the end of each development year foreach accident year can be isolated.What is evident from the summarized results presented in Table5.3 is that the expected number of open claims at any givenyear of development will slowly increase as one moves from theoldest accident years to the most recent.For example, at the end of 35 years of development, the numberof open claims is expected to increase from 50 for accidentyear 1970 to 62 for accident year 2000. This is an increase of24% in the number of open claims. And at the end of 60 years ofdevelopment, the number of open claims is expected to increasefrom 3.5 to 5.0, an increase of 42.9%. The percentage rate ofincrease in the number of open claims for each given column