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

ESTIMATING THE WORKERS COMPENSATION TAIL 629in critical commodities (such as petroleum) and their ubiquitousderivative products (e.g., plastics and synthetics).We note that SAIF’s actual age-at-injury distribution isweighted heavily toward the middle-age groups. If a muchyounger distribution were assumed, this would dramatically increasethe survival probabilities during each year of development,and the resulting tails would be considerably greater than thosepresented in this paper. The age-at-injury distribution can varysignificantly depending on statutory provisions for qualificationfor a permanent disability award and the nature of the risks insuredor self-insured.In the static mortality model, we started with the assumptionof a beginning gender mix of 75% male and 25% female. Becauseof the higher mortality rates of males at all ages, by the50th year of development, the percentage of surviving claimantsthat are male is expected to drop to 64.5%. By the 72nd year ofdevelopment, a 50—50 gender split is expected.The magnitude of the elder care cost bulge is quite significant.It fully accounts for the large degree to which SAIF’s actualMPD PLDFs exceed those indicated by the static mortality modelduring later DYs (see Figure 1.2).Figure 7.1 provides documentation of the extent of increasesin SAIF’s incremental paid medical costs per open claim at aconstant 2003 cost level for DYs 16—56. If the common actuarialassumption that incremental medical severities are independentof the age of the claimant were true, then the graph line in Figure7.1 would be essentially flat, since all severities have beenplaced on a constant 2003 cost level.The above average costs at 2003 cost level were for AY1945 and subsequent accident years during CYs 1991—2003.Table E.1, Appendix E provides a summary of the detaileddata supporting Figure 7.1.The implications of Figure 7.1 are serious with respect to thereasonableness of the practice of estimating MPD reserves by