NCCI – first take on the state of the work comp industry in 2011

(I’ll be live blogging from NCCI again this year with several updates throughout the day)
Higher combined ratios, spotty market hardening, spikes in medical costs, ups and downs in claim frequency, more hiring in some sectors – for whatever reason, there’s a lot of interest in work comp this year, and the all-time high in attendance at this year’s NCCI meeting is evidence of this interest.
NCCI CEO Steve Klingel described the work comp market as “conflicted”; some markets are getting better, indicators show positive and negative trends, and frequency is bouncing around a bit too. Here are the highlights.
– the combined ratio for accident year 2011 indicates an improvement, dropping two points to 114. (the calendar year combined ratio was 115, marking a deterioration.
– claim frequency declined in 2011, but the decline was minimal at best at 1%.
– medical costs for lost time claims bumped up four points
– written premium volume increased significantly, up 7.4%. While that’s good news indeed, remember premiums have dropped 27% since 2005. Clearly there’s a lot of ground to make up…
And the big news, for the third consecutive year, operating margins were essentially flat.
That’s no surprise – investment returns are awful, hiring is not where it needs to be, there’s a lot of competition for comp premium.
So, what are the factors, the wildcards that may move the market? Klingel cited major shifts in the economy, potential legal issues with health reform, and political gridlock.
My take is Klingel missed the major wildcard with reform; if PPACA is overturned, the number of uninsured will grow, there will be more cost-shifting to work comp, and we’ll see medical costs increase. And that’s on top of the issues inherent in treating claimants who don’t have medical insurance for their non-occ conditions.
If health reform sticks, the number of uninsured will decline by more than thirty million, there will be less incentive on the part of providers to shift costs to work comp payers, and insurers won’t have to cover treatment for conditions that inhibit healing and return to work.
Thanks to NCCI’s Greg Quinn for providing the details behind Klingel’s presentation. NCCI is pushing social media even more this year; they’ve got a mobile app, social media site, and ten different publications are reporting from the conference.
NCCI was the first industry conference to welcome bloggers and online media, and kudos to them for recognizing early on what has taken others a bit longer to figure out.
Next up – Dennis Mealy’s annual state of the line presentation – I can’t wait…