DEFINITION of '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).

BREAKING DOWN 'Accident-Year Statistics'

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.

How Accident-Year Statistics Work

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.

RELATED TERMS
  1. Policy Year Experience

    Policy year experience describes the relationship between the ...
  2. Advance Premium

    An advance premium is an initial premium paid to bind an insurance ...
  3. Insurance Premium

    An insurance premium is the amount of money that an individual ...
  4. Calendar Year Accounting Incurred ...

    Calendar year accounting incurred losses is a term used in the ...
  5. Loss Ratio

    Loss ratio is the ratio of losses to gains such as the ratio ...
  6. Losses Incurred

    Losses incurred refers to benefits paid to policyholders during ...
Related Articles
  1. Insurance

    6 Things That Spike Your Auto Insurance

    Several factors can cause your auto insurance to rise. Knowing what these are can help you find the best deal.
  2. Insurance

    What To Do When Your Insurance Company Won't Pay

    Struggling to get a claim honoured? Find out what you can do.
  3. Insurance

    12 Car Insurance Cost-Cutters

    Car insurance rates are on the rise. If car insurance costs are dragging you down, use these tips to free yourself from some of the extra weight.
  4. Tech

    How Smart Technology Is Impacting Insurers

    Smart technology promises to bring major change to the way that insurers monitor and protect their customers.
  5. Insurance

    4 Types Of Insurance Everyone Needs

    Here are four forms of insurance that are vital to have.
  6. Insurance

    Car Insurance Rates Too High? Check the Record

    Your driving history is clean as a whistle yet your premium has shot up. Here’s how to find out why – and what you can do about it.
  7. Insurance

    What Happens If You Lie on a Car Insurance Application

    The majority lies to save on premiums – but consequences can be severe for not owning up to things like tickets, accidents and how much you drive your car.
  8. Insurance

    The History of Insurance in America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
  9. Tech

    How Big Data Has Changed Insurance

    No longer confined to technology, big data has become integral to providing solutions to the insurance industry's long standing challenges.
RELATED FAQS
  1. How does the insurance sector work?

    Learn more about the insurance sector, a historically safe place for equity investors and the home of some of the largest ... Read Answer >>
  2. Loss Ratio vs Combined Ratio

    Learn about the loss ratio and combined ratio, what the two ratios measure and the main difference between the two. Read Answer >>
Hot Definitions
  1. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  2. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  3. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
  4. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  5. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  6. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
Trading Center