We do all of our client work against the background of our continual and on-going analysis of large current databases containing thousands of workers' compensation, liability, and property claims. All of the work we do for any particular client is based primarily on that client's own loss experience and exposure to loss. However, statistical and actuarial theory proves ("Law of Large Numbers") that when the numbers of claims are relatively small, as they are for many clients, the reliability of the estimates and projections can be improved by referencing large databases of claims from similar self-insurers. When we work with cities, we reference a database of claims from cities; when we work with K-12's we reference our K-12 database, etc.

 

Some actuaries, particularly those that work largely with insurance companies, rely heavily on "off-the-shelf" reference data published by various insurance industry outlets. We reference insurance industry data for one item alone, the workers compensation loss development "tail factor." The Insurance Industry is the only reliable source for the workers' compensation tail factor, since calculating it requires forty or more years of data on millions of claims.

 

Here are some of the technical items that we are continually analyzing and updating:

 

• Loss Development patterns;
• Statistical claim size-of-loss distributions;
• Frequency of closed workers' compensation claim re-openings;
• Average claim amounts ("claim severity");
• Claim frequency (number of claims per $100 of payroll, ADA, per FTES, per $1,000 of TIV, etc.);
• EPL losses compared to other types of liability losses;
• The degree to which inflation changes, from year to year, the percentage of losses that exceed a given SIR.

 

Simply updating the values of the above items is not sufficient. Actuaries can do this either quickly and superficially or in exhaustive detail using rigorous actuarial analysis. We perform a rigorous actuarial analysis to estimate these items.