copyright 2012 national council on compensation insurance, inc. all rights reserved. texas biennial...

Copyright 2012 National Council on Compensation Insurance, Inc. All rights reserved.

Texas Biennial Hearing

December 17, 2012

[email protected] [email protected] 561-893-3781


2

Statistical Agent Services

• Collection and validation of various types of data

• Summarizing data and providing reports to TDI

Advisory Organization Services

• Production of experience rating modifications

• Third loss cost filing is pending

Proof of Coverage Vendor

• Supply policy transaction information to TDI

NCCI’s Role in Texas


3

State of the Industry Countrywide

Vs. Texas


4

Countrywide Workers Compensation Premium—First Increase in Years

Net Written Premium

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

10

20

30

40

50

31.0 31.3 29.8 30.5 29.126.3 25.2 24.2 23.3 22.3

25.0 26.129.2 31.1

34.737.8 38.6 37.6

33.830.3 29.9 32.2

31.0 31.329.8 30.5

29.126.3

28.427.0 25.9 25.0

28.6

32.1

37.7

42.3

46.547.8

46.544.3

39.3

34.6 33.836.3

State Funds ($ B)Private Carriers ($ B)

$ Billions

Calendar YearSource: 1990–2010 Private Carriers, Annual Statement Data; 2011, NCCI

1996–2011 State Funds: AZ, CA, CO, HI, ID, KY, LA, MD, MO, MT, NM, OK, OR, RI, TX, UT Annual StatementsState Funds available for 1996 and subsequent


5

2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.0

0.5

1.0

1.5

2.0

2.5

3.0

2.61 2.60 2.64 2.712.81 2.74

2.59

2.19

1.922.16

Calendar Year

Pre

miu

m i

n $

Bil

lio

ns

Texas Workers Compensation Premium Volume Increases

Direct Written Premium

Source: NAIC Annual Statement data


6

2002 2003 2004 2005 2006 2007 2008 2009 2010 201180

90

100

110

120

130

111110

107

103

93

101 101

110

115 115

106

97

8887 86

98

104

109

116114

Calendar Year Accident Year

Countrywide Accident Year Net Combined Ratio

Workers Compensation Calendar Year vs. Ultimate Accident Year Private Carriers

Accident Year data is evaluated as of 12/31/2011 and developed to ultimateSource: Calendar Years 2002–2011, Annual Statement Data;

Ultimate Accident Years 2001–2011, NCCI analysis based on Annual Statement DataIncludes dividends to policyholders

Percent


7

Texas Accident Year Combined Ratios

2011 2010 2009 2008 200760%

80%

100%

94.3%93.1%

82.0%

84.7%

75.1%

Accident Year

Co

mb

ined

Rat

io

Sources: NCCI financial data, NAIC Annual Statement data


8

TX WV DC AR AK MO SD KS, VT

AL, VA

HI ME, MT, NM

ID, NV

OK NC GA, NE, TN

NH IN UT IL, IA

SC FL KY, MS, RI

LA MD AZ CO, CT

OR0

20

40

60

80

100

120

140

160

180

93

165

Results Vary From State to State

Accident Year 2010 Combined Ratios

Data is evaluated as of 12/31/2010


9

ND IN AR VA DC NV UT MA CO MS KS WV OR TX AZ MO HI MD NE MI WY DE FL OH NM GA IA NC SD KY AL RI ID TN MN SC LA VT WA WI PA ME NH MT NJ OK NY IL CA CT AK0.0

1.0

2.0

3.0

4.0

5.0

6.0

1.02

1.60

3.01

Workers Compensation Premium Rate Ranking

Premium Rate Index per $100 of Payroll

Source: 2012 Oregon Workers’ Compensation Premium Rate Ranking SummaryIndexes based on rates in effect on January 1, 2012

TX Ranking14th (out of 51).

$0.31 - $1.04

$1.05 - $1.26

$1.27 - $1.49

$1.50 - $2.56

Not included

Countrywide = $1.14Based on the latest NCCI approved rates and loss costs in the various states.

Texas = $0.66

DC

OH

NM

MI

NC

MN

WI

IL

MO

IN

OR

KS

NE

ID

AL

CA

LA

KY

TX

AZ

VA

FL

MS

SCAR

GA

TN

IA

COUT

OK

OK

WA

WV

NDME

AK

SD

NV

PA

NY

MT

MDDE

NJCT

RI

MA

VTNH

HI

WY

Average Voluntary Pure Loss Costs Quartiles

NCCI’s Loss Cost Filings in Texas

11

2012 National Council on Compensation Insurance, Inc. All rights reserved.

•Initial Filing

6/1/2011

•Decrease of 0.3%

6/1/2012

•Decrease of 3.8%

6/1/2013*

* Filing is pending

$0.53 - $0.78

$0.79 - $0.97

$0.98 - $1.06

$1.07 - $1.56

Not included

Countrywide = $0.94Based on the latest NCCI approved rates and loss costs in the various states.

Texas = $0.66

DC

OH

NM

MI

NC

MN

WI

IL

MO

IN

OR

KS

NE

ID

AL

CA

LA

KY

TX

AZ

VA

FL

MS

SCAR

GA

TN

IA

COUT

OK

OK

WA

WV

NDME

AK

SD

NV

PA

NY

MT

MDDE

NJCT

RI

MA

VTNH

HI

WY

Average Voluntary Pure Loss Costs Quartiles Using Texas Payroll Distribution


13

Countrywide vs. Texas Experience Rating

Source: Average Experience Rating Modifications produced by NCCI

2004 2005 2006 2007 2008 2009 2010 20110.76

0.80

0.84

0.88

0.92

0.96

1.00

0.898

0.865

0.8350.844

0.900 0.901 0.900

0.928

0.972 0.977 0.973 0.969 0.9690.978 0.983

0.985

Average Intrastate Mod

TX CW Rating Year

Mod

ifica

tion

Fact

or


14

Countrywide vs. Texas Experience Rating

Source: Average Experience Rating Modifications produced by NCCI

2004 2005 2006 2007 2008 2009 2010 20110.76

0.80

0.84

0.88

0.92

0.96

1.00

0.896

0.865

0.8230.814

0.849 0.856 0.8610.871

0.958 0.9600.945

0.930 0.9330.941 0.947 0.943

Average Off-Balance Mod

TX CW Rating Year

Mod

ifica

tion

Fact

or


15

5.8%

22.1%

32.0%

32.4%

7.6%

Region

Number of Texas Policies by Industry Group Compared with Countrywide/Region

6.2%

17.9%

43.5%

26.9%

5.5%

Texas

Manufacturing

5.7%

20.5%

35.4%

32.1%

6.2%

Countrywide

Regional states are AR, LA, NM, and OKCountrywide and Regional Averages do not include Texas.Based on NCCI’s Statistical Plan data

Contracting Office & Clerical Goods & Services Miscellaneous


16

Claim Frequency


17

Countrywide Workers Compensation Lost-Time Claim Frequency

Declined in 2011Lost-Time Claims

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011p

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

-4.2 -4.4

-9.2

0.3

-6.5

-4.5

0.5

-3.9

-2.3

-4.5

-6.9

-4.5 -4.1 -3.7

-6.6

-4.5

-2.2

-4.5-5.9

10

-4

3

IndicatedLabel Indicated

Percent

Accident Year2011p: Preliminary based on data valued as of 12/31/20111991–2010: Based on data through 12/31/2010, developed to ultimateBased on the states where NCCI provides ratemaking services, including state funds; excludes high deductible policiesFrequency is the number of lost-time claims per $1M pure premium at current wage and voluntary loss cost level

Cumulative Change of –55.5%

(1991–2010 adjusted)

-1


18

Texas Claim Frequency

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201015

25

35

45

55

43

Policy Year

Fre

qu

ency

per

Mil

lio

no

f O

n-L

evel

ed P

rem

ium

Based on NCCI’s financial dataFrequency of lost-time claims adjusted to a common wage level


19

Texas Workers Compensation Lost-Time Claim Frequency

Lost-Time Claims

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-15

-10

-5

0

5

10

4.2

0.2

-3.6

-11.8

-9.0

-13.6

-5.1

-8.9-6.8 -6.3

-5.2

0.7

3.2

Policy Year

Cumulative Change of -4.9%(1998–2010)

Percent Change

Based on data through 12/31/2011, developed to ultimate


20

TX AR LA NM OK Reg CW0

2,000

4,000

6,000

732 653 749 9121,415

958 879

2,0492,799

2,076

3,2282,855

2,632 2,754

2,781

3,452

2,825

4,140 4,270

3,590 3,633

Lost Time Medical Only

Cla

im F

req

uen

cy

Texas Average Claim FrequencyFrequency per 100,000 Workers—All Claims

Based on NCCI’s Statistical Plan data


21

Claim

frequency is

a key cost

driver

Texas

frequency has

increased

Texas

frequency is

lower than

CW and

region

CW frequency

decreased in

latest year

Key Takeaways— Claim Frequency


22

Indemnity Severity


23

Countrywide Workers Compensation Indemnity Claim Costs—Modest Increase in 2011

Average Indemnity Cost per Lost-Time Claim

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011p

5

10

15

20

25

$9

.8

$9

.5

$9

.2

$9

.7

$9

.8

$1

0.4

$1

1.2

$1

2.2

$1

3.5

$1

4.8

$1

6.2

$1

6.7

$1

7.5

$1

7.6

$1

8.3

$1

9.3

$2

0.5

$2

2.3

$2

2.5

$2

1.9

$2

2.3

+1.0%-3.1% -2.8%+4.9%+1.7%+5.9%

+7.7%+9.0%

+10.1%

+10.1%

+9.2%+3.1%

+4.6%+1.0%+3.6%

+5.5%

+6.5%

+8.8%+0.6%-2.8%+2%

Accident Year2011p: Preliminary based on data valued as of 12/31/20111991–2010: Based on data through 12/31/2010, developed to ultimateBased on the states where NCCI provides ratemaking services, including state fundsExcludes high deductible policies

Annual Change 1991–1993: –1.7%

Annual Change 1994–2001: +7.3%


IndemnityClaim Cost

($ '000s)


24

Texas Average Indemnity Severity

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20104

9

14

19

24

29

22.8

14.6

Adjusted to Current Wage Level Actual

Policy Year

Ind

emn

ity

Ave

rag

eC

laim

Sev

erit

y ($

'000

s)

.15.3

AY 11

Based on NCCI’s financial data for lost-time claims at current benefit level and developed to ultimate


25

Texas Average Indemnity Claim Severity

Lost-Time ClaimsIndemnitySeverity ($ '000s)

The severity figures shown are in excess of wage trendBased on data through 12/31/2011, on-leveled and developed to ultimate.

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

5

10

15

20

25

$23.6

$23.4

$23.6

$22.0

$22.5

$20.8

$20.1

$18.2

$17.1

$16.7

$17.3

$15.6

$15.8

-0.9%

0.7%

-6.6%

2.0%

-7.4% -3.4%-9.4%

-6.2% -2.4%

4.1%

-10.0%

1.3%

Policy Year


26

2007 2008 2009 2010 201110

12

14

16

18

20

22

24

16 16

21

22

Texas Countrywide

Accident Year

Co

st p

er C

ase

($ '0

00s)

Texas vs. Countrywide Average Indemnity Claim Severity

*Preliminary

Source: NCCI financial data valued as of 12/31/2010 for Countrywide AY 2007 – 2010Source: NCCI financial data valued as of 12/31/2011 for Countrywide AY 2011 and Texas AY 2007 - 2011


27

Average Indemnity Claim Severity in the Region

TX AR LA NM OK0

5

10

15

20

25

30

35

40

45

16

13

40

22

29

Ind

emn

ity

Sev

erit

y ($

'000

s)

Based on NCCI’s financial data for lost-time claims


28

Indemnity costs

remain low despite

increase in the most

recent year

Countrywide

indemnity severity

increased slightly

Texas average

indemnity cost is

lower than the region

and countrywide

Key Takeaways— Texas Indemnity Benefit Costs


29

Medical Severity


30

Medical Benefits Constitute the Majority of Total Benefit Costs in Texas

63%

37%

Texas

Indemnity Medical

56%

44%

Region

59%

41%

Countrywide

Regional states are AR, LA, NM, and OKBased on NCCI’s Statistical Plan data


31

Countrywide Workers Compensation Medical Severity

Moderate Increase in 2011 Average Medical Cost per Lost-Time Claim

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011p

5

10

15

20

25

30

$8

.1

$8

.2

$8

.1

$8

.8

$9

.2

$9

.9

$1

0.9

$1

1.8

$1

3.1

$1

4.0

$1

5.9

$1

7.3

$1

8.7

$1

9.7

$2

1.3

$2

2.6

$2

4.0

$2

5.5

$2

6.6

$2

6.9

$2

8.0

+6.8%+1.3% -2.1%+9.0%+5.1%

+7.4%+10.1%

+8.3%+10.6%

+7.3%

+13.5%+8.8%

+7.7%+5.4%

+8.5%+5.9%

+6.3%+6.1%

+4.2% +1.3%+4%

Accident Year




MedicalClaim Cost

($ '000s)

2011p: Preliminary based on data valued as of 12/31/20111991–2010: Based on data through 12/31/2010, developed to ultimateBased on the states where NCCI provides ratemaking services, including state fundsExcludes high deductible policies


32

Texas Average Medical Severity

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20104

9

14

19

24

29

34

39

44

34.4

22.0

Adjusted to Current Wage Level Actual

Policy Year

Med

ical

Ave

rag

eC

laim

Sev

erit

y ($

'000

s)

.23.5

AY 11

Based on NCCI’s financial data for lost-time claims at current benefit level and developed to ultimate


33

Texas Average Medical Claim Severity

Lost-Time ClaimsMedicalSeverity ($ '000s)

The severity figures shown are in excess of wage trendBased on data through 12/31/2011, on-leveled and developed to ultimate

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

5

10

15

20

25

30

35

40

$36.3

$37.3

$38.7

$37.5

$36.1

$34.4

$32.1

$28.9

$28.0

$28.1

$26.7

$24.7

$23.5

2.5%3.8%

-3.1%-3.7%

-4.7%-6.7%

-9.9% -3.3%

0.5%

-5.2%-7.3%

-4.9%

Policy Year


34

2007 2008 2009 2010 2011*20

22

24

26

28

30

27

2324

28

Texas Countrywide

Accident Year

Co

st p

er C

ase

($ '0

00s)

Texas vs. Countrywide Average Medical Claim Severity

*Preliminary

Source: NCCI financial data valued as of 12/31/2010 for Countrywide AY 2007 – 2010Source: NCCI financial data valued as of 12/31/2011 for Countrywide AY 2011 and Texas AY 2007 - 2011


35

TX AR LA NM OK0

5

10

15

20

25

30

35

40

45

50

23

28

47

37

27

Me

dic

al

Se

ve

rity

($

'00

0s

)

Based on NCCI’s financial data for lost-time claims

Average Medical Claim Severity in the Region


36

Compris

e 63% of

benefits

Medical

severity

continues

to decline

Costs are

lower than

countrywid

e

Costs are

lowest in

the region

Key Takeaways— Texas Medical Benefit Costs


37

Closing Remarks

Thank you!

copyright 2012 national council on compensation insurance, inc. all rights reserved. texas biennial...

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