NCCI Chief Actuary Kathy Antonello’s State of the Line presentation – is the hot ticket at AIS. (Her presentation will be available here right after her presentation ends; the password is Transforming .)
Antonello’s use of new imaging and automation to present data was compelling and highly informative, really helping this non-actuary understand the import of the data and findings, and potential impact going forward.
Key intro points – Medical severity changes remain moderate, but drug costs are increasing at a troubling rate. Definitions of “employee” are evolving as is the “workplace.
Key data points
- Work comp net written premium for private carriers up 2.9% to almost $40 billion in 2015. State funds accounted for $5.8 billion in premiums, for a total of $45.5 billion – up from 44.2.
- WC combined ratio improved to 94, a six-point drop from 2014 and the second best combined ratio since 1990
- Most recent P&C industry cycle was a seven-year one, shorter than previous cycles
- Unsurprisingly, net investment income decreased slightly across all P&C lines.
Private carrier details
- direct written premium decreased in 9 states, with the biggest drop in OK due to reforms.
- CA and NY had larger than average increases with CO DC and OH jumping by double digits.
Work Comp Drivers
- Payroll is up 23% since 2010 – a pretty nice increase.
- Construction employment has led the way, up 17%
- Frequency continues its long term structural decline, down another 3 points – just below the long-term average of 3.6%
- Medical is 58% of total benefits
- Medical cost per LT claim DROPPED 1% in 2015 – more on this later…
- Indemnity expense up 1 point from 2015 on a per-claim basis.
- Loss ratio drop of 6 points is by far the most important contributor to the improved combined.
- Loss adjustment expense (LAE) ratio increased somewhat, due to the improvement in losses.
- Five-year investment gains dropped to 13 percent, down below the long-term average of 14.1 percent.
- Reserve deficiency down to $7 billion
The operating gain jumped to 18 percent, a historic high – and far above the long-term industry average of 5.8%
Not surprisingly, all this good financial data is leading to premium price reductions. Rates are decreasing, with 57% of agents seeing a decrease in rates at renewal in Q4 2015.
Most surprising is the data on medical severity – it is actually tracking BELOW medical CPI increases, a major change from prior years.
This despite a 6 point increase in drug costs, a finding that – argh! – will be discussed in detail in the research discussion which is scheduled at the same time as my panel on regulatory issues…
More – lots more – to come on the medical cost finding. Spoiler alert – it looks like the reforms in California are working to cut unnecessary medical expenses…with Cali accounting for about a fifth of total work comp premium, that’s a big driver.