Policy Year, Accident Year, and Calendar Year

Explanation of the differences among these type of data for workers compensation insurance.

Policy year information reflects an actuarial perspective or look at what has happened to a particular policy year over time. A policy year is based on policies with effective dates in a twelve month period. So, policy year 2020 data are those policies with effective dates between 1/1/20 and 12/31/20. For example, if you look at policy year 2018 today, it would have everything that had developed on a policy since 2018; all losses, premiums, reserves, expenses, allowances, etc. up to this point in time. 

“Policy year reporting requires that all premium and loss activity, whether payment or reserve adjustment, be applied to the policy year to which the policy effective date corresponds… The policy year results provide the most exact matching of premium and losses, but policy year experience is slightly older, on average, than the corresponding calendar-accident year experience.”

Accident year data is based on accidents that occur within a twelve month period. Thus, accident year 2020 is based on those accidents that occurred between 1/1/20 and 12/31/20​​.”Calendar-accident year experience reflects premium transactions occurring in that year along with loss experience for claims with accident dates beginning January 1 and ending December 31 of that year… Calendar-accident year experience provides more recent results, but when compared to policy year experience, the calendar-accident year premiums are not as perfectly matched to losses, because audits and retrospective rating adjustments on prior-year policies are reported in the year they are made.” 

To compare, a policy could be effective 9/1/18 and an accident could occur on 2/1/19. The loss would be included in policy year 2018 and accident year 2019 Or, if an accident occurred on 12/1/18 the amount would be reported in policy year 2018 and also in accident year 2018. 

Financial Call data is used in Calendar-Accident Year Underwriting Results and Policy Year Underwriting Results.

Calendar year information in contrast, is more from an accounting perspective and contains information about each policy year. For example, policy years 1996-2016 could all have transactions going on in calendar year 2016, and that is what calendar year information is showing – many policy years with activity within one calendar year.

Looking at policy year 2010 in calendar year 2020, we probably would not see any premium activity still occurring during 2020, but we would still see loss activity. The results for calendar year 2020 would include that loss information for policy year 2010, along with the loss information for all other policy years that had transactions during the 2020 year. As we approach the more current policy years, we would also see more premium activity going on for those years as well as loss activity.

Note: Calendar year combined ratios may be lower than accident year if they include reserve releases from prior years. Accident year data reflect incurred losses (paid and reserved) for claims that occurred in that specific year, and are generally viewed as more reflective of the industry’s current financial condition.