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

630 ESTIMATING THE WORKERS COMPENSATION TAILFIGURE 7.1Incremental Paid Severity (at 2003 Cost Level)inflating current annual medical costs for each claim at normalrates of medical cost escalation until the expected year of death.In doing so, the actuary would be assuming, on average for allclaims open during DYs 10—20, that an annual severity at a 2003cost level of approximately $6,000 per year would be appropriatefor all future years, regardless of how old the claimant becomes.Figure 7.1 indicates that as each claimant advances into his orher 70s or 80s, a significantly higher assumed severity at a 2003cost level would be more appropriate.8. ESTIMATING THE EXPECTED VALUE OF MPD RESERVESIn Tables 8.1A and 8.1B cumulative loss payments for a hypotheticalPD claimant are displayed. This might be a profile ofpaid losses for a male claimant injured on December 15, the reserveevaluation date. At age 35.9, the claimant is expected tolive another 40 years. Two different methods of estimating themedical case reserve for this claimant at the end of the first year