Chief Actuary Kathy Antonello gave the state of the line at AIS: here are the top data points on a calendar year basis for work comp, the P&C industry numbers were also presented and should be available later here.
- private carrier combined ratio of 98%; state funds at 115%
- private carrier pretax operating gain of 14%, down from 17.7% in 2013 (this is NOT equivalent or even similar to profitability or returns)
- state fund operating gain of 5%
- private carriers saw a 4.6% jump in direct written premiums
- claim frequency is down 2 percent for NCCI states; CA is actually seeing an increase in frequency.
Key claim cost data points
- Indemnity cost per lost time claim was up 4% in 2014, continuing the trend for claim costs to go up faster than the average weekly wage.
- medical trend for LT claims was also up 4% in 2014; average cost per LT claim is $29.4K. (medical CPI was up 2.4%)
- these data points vary widely by state from an average annual 2% decrease over the last 5 years to a 10% increase
Ms Antonello was careful to clearly explain the factors driving financials, what the descriptions mean – and don’t mean, and how today’s results compare to historical averages. She noted that the big jump in investment gain seen in 2013 was largely driven by a single corporate entity’s capital gain; adjusting for this dropped the return – and the operating gain – dramatically. In fact, actual investment gain was almost dead even with the 20 year rolling average of 14.2%.
Who cares?
Well, mis-understanding these data points has led others – notably ProPublica – to claim the WC industry is delivering a historic return, and infer that return has been due to reduced benefits for injured workers and a system slanted to favor employers.
More on that in a future post…
Antonello and her colleagues have done yeoman work in an apparent effort to help laypeople better understand the work comp system’s financial performance. Using videos, data maps and graphics, and clear and concise language, presenters illustrated correlations, noted there is a $10 billion reserve deficiency, and clarified the system-wide decrease in premium levels set by work comp bureaus (down 4.3% for 2015).
Another graphic clearly showed how changes in the economy affected premiums in individual business sectors. The use of these visualization tools indicates NCCI is doing much more to help stakeholders quickly and readily track the industry’s evolution. Kudos to Antonello and her colleagues for this initiative.
Today, premiums are up, despite a decrease in premium levels. This is happening because employment has increased, and as wages are up slightly, there’s a multiplicative effect. Compared to 2005, the payroll index is up 16%.
Simply, work comp total premiums are based on the rate multiplied by wages, so the more people working and the higher their wages are, the higher the premium dollars.
What does this mean for you?
Across the nation, work comp is pretty level, however a few individual states are seeing rather radical changes. Medical and indemnity expenses continue to outpace overall benchmarks
