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

668 ESTIMATING THE WORKERS COMPENSATION TAILUtilization measures the number of services per claim forthose claims receiving services in that category.Paid losses in the service categoryUnit cost =Number of services in the service category :Unit cost measures the average paid loss per service in thatservice category.Mix =Number of claims receiving services in that categoryTotal number of claims receiving any kind of service :Mix measures the proportion of claims receiving that service.If you multiply these three components together you getCost per claim =Paid losses for the service category:Total number of claims receiving any kindof service in that categoryThe total cost per claim is then the sum of the cost per claimover all service categories. The 9% medical cost escalation referredto in this paper is the combined effect of utilization, unitcost, and mix on the average cost per claim over time.SECTION C.5.DERIVATION OF ASSUMED CLAIM REPORTING ANDCLOSURE PATTERNSTables C.5.1 and C.5.2 disclose the specific assumptions(from SAIF experience) that form the basis for the PLDF staticand trended mortality model estimates.The following assumptions are held constant for all accidentyears in the model:² There are 5,000 ultimately reported PD claims.² A claim-reporting pattern is based on recent historicalexperience.