Accident-Year Statistics

Accident-Year Statistics are used by insurance companies to gauge what percentage of the premiums received are being paid out in claims. They are a measure of the total losses against the total revenue (both deductibles and premiums).

Accident year statistics are a useful tool with regards to setting the premiums on all types of insurance for the following year. In watching the trends of the accident-year statistics, insurance companies are able to forecast what their losses are likely to be, and therefore, decide what premiums to charge in order to make a profit.

Insurers live by their statistics. They need to know how much they'll be spending in claims and how much they'll be collecting in premiums. It's a vast data collection effort that underpins rate-setting for all types of insurance.

Let's take worker compensation claims for California in 2016, for example. According to the WCIRB, which studies claims in the state, California written premium (gross of deductible credits) for 2016 was approximately $18.1 billion, and losses were $12.5 billion, or 5% above the projection for accident year 2015 and represented the seventh consecutive year of increasing ultimate losses.

That's the mile-high view, but behind these numbers are thousands more about the size of claims, how projected losses compared with actual losses, and many ratios that define the market and help set prices for the following year.

 Auto insurance data is even more complex, with more than 268 million registered vehicles on the roads getting involved in 4.5 million crashes, that in 2015 resulted in 32,166 fatalities and 1.7 million injuries. Insurers and state and federal agencies have compiled millions of datapoints on how and when these accidents have occurred, including whether seat belts were used, and a host of other data. Insurers, by the way, paid out $163 billion in auto claims in 2016.

Insurers have standardized the way they report all this data. Here are a few common terms they use in accident-year statistics. The policy year is the year in which the policy was effective. The calendar year shows the report is based on the actual day of the transaction such as when a claim payment was made. The accident year is the year in which the claim occurred. In insurance the date of the accident is called the Date of Loss (DOL). In force looks at what policies were in effect at a point in time.