opening remarks: 2014 industry observations and outlook · 2015-07-28 · © copyright 2014 ncci...

© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.

2014 Annual Issues Symposium

OPENING REMARKS: 2014 Industry Observations and Outlook Stephen J. Klingel, CPCU, WCP NCCI President and Chief Executive Officer


Checklist of High Profile Topics

Top Line Numbers

Defining the Market Condition

Adapting for Success in a Changing Environment

External Pressures

The Realities of Improved Data



Workers Compensation Underwriting Results Improved Again

Private Carriers

115

108

101

100

105

110

115

120

2011 2012 2013p

Percent

p Preliminary

Source: 1990–2012, Annual Statement Data; 2013p, NCCI


-4.5

-6.9

-4.5 -4.1 -3.7

-6.6

-4.5

-2.2

-4.3

-5.9

10.5

-4.0

-6.1

-2

3.5

-1.0

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013p

IndicatedAdjusted*

* Adjustments primarily due to significant changes in audit activity

2013p: Preliminary based on data valued as of 12/31/2013

2000–2012: Based on data through 12/31/2012, developed to ultimate; excludes high deductible policies

Average frequency for the states where NCCI provides ratemaking services, excluding WV; including state funds

Frequency is the number of lost-time claims per $1M pure premium at current wage and voluntary loss cost level

Percent

Accident Year

Workers Compensation Lost-Time Claim Frequency

Downtrend Continues


Percent Change

Changes in Workers Compensation Claim Severity

2

3

-4

0

4

8

12

16 Change in Lost-Time Indemnity Claim SeverityChange in Lost-Time Medical Claim Severity

2013p: Preliminary based on data valued as of 12/31/2013

1991–2012: Based on data through 12/31/2012, developed to ultimate; excludes high deductible policies

Average severity for the states where NCCI provides ratemaking services, including state funds; excluding WV

Accident Year


Top Line Industry Numbers

Frequency -2%

Indemnity +2%

Medical +3%

Combined Ratio 101%


Defining the Current Market Condition

Balanced Optimistic

Disappointing

Negative

Tenacious

Resilient

Discouraging Promising

Cautious Bright

Dynamic

Pessimistic


Percentage Difference Between Individual Carriers and Statewide Average

-50.0% -25.0% 0.0% 25.0% 50.0% 75.0%

Finding the Average



-50.0% -25.0% 0.0% 25.0% 50.0% 75.0%

Indicated Loss Cost Changes for Individual Carriers Can

Differ Greatly from Statewide Average


External Factors Can Quickly Tip Results…

TRIA Renewal

Health Care Environment and ACA

State-Based Decisions - FL Morales Case

Other Factors



A Critical Tool—Largely Underused

“Insurers actually process only about 10% to 15% of available data”

Ernst & Young

“The amount of new digital data increases 40% annually and insurers large and small are looking for ways to benefit from it”

McKinsey and Company


Changing Dynamics

Success will increasingly be based on the ability to rapidly understand and leverage the burgeoning amount of available data.

Today, US property/casualty insurers have access to a rapidly expanding volume of data from transactions, claim histories, social media connections, internet searches and even GPS-type devices.

New opportunities ahead for those who can leverage the use of Predictive Modeling, Big Data, and other advanced analytics.


Improved Data Analysis Allows Industry to Remain Nimble and Responsive

Improved Loss Forecasts

Improved Claims Management

Improved Underwriting

Reduced Costs and More Accurate Pricing

Early Detection of Adverse Claim Developments

Ability to Tailor Products, Services, and Information to Specific Customer Segments


New World Has Risks As Well as Opportunities

To succeed you’ll need to master the following concepts:

Data Stewardship

Information Security

Accountability


© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved. © Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.

Data Stewardship

Who Owns the Data?

Internal Controls

Internal Governance

Validating Conclusions


Information Security

How Sensitive is the Data?

Gathered Internally

Acquired Externally

Contains Personal or Health Information?

Are there Inherent Usage Restrictions?

Your security is only as strong as your weakest link (which may not even reside in your company)


Accountability

You have a clear responsibility to use data properly

Invalid conclusions could sink even your best strategies

The importance of data is changing roles in companies

Data strategies are moving to the front lines

Don’t forget the back office – you need them to maintain governance, quality standards, usage guidelines, etc.


Remaining Competitive

Understand the Environment

Adjust Operations to New Realities

Embrace Entrepreneurial Opportunities

Remain Mindful of Stewardship Role


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opening remarks: 2014 industry observations and outlook · 2015-07-28 · © copyright 2014 ncci...

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