NCCI State of the Line report
At the 2016 NCCI Annual Issues Symposium, NCCI Chief Actuary Kathy Antonello presented their annual State of the Line Report. The entire State of the Line report can be viewed on the NCCI web site (NCCI.com).
Some of the highlights:
- Total Property Casualty premiums increased 3.3% in 2015. All lines except Fire and Allied Lines had premium increases.
- Workers’ compensation premiums increased 2.9%.
- Total workers’ compensation industry premiums were $39.7 billion. This does not include state funds.
- Combined ratios for the workers’ compensation industry in 2015 were 94%. This is the best underwriting results the industry has seen in decades.
- The entire Property Casualty industry had a combined ratio of 98%. The continued absence of major catastrophic storm loses are a big factor in this.
- Investment gains continue to be a challenge for the Property Casualty industry. Net investment income was slightly down in 2015 and this has been trending downward the last three years.
- Workers’ compensation premiums decreased in 9 states with Oklahoma having the biggest decreases.
- Three states saw double digit premium increases.
- The biggest driver of workers’ compensation premium growth is payroll growth. Payroll has increased 23% since 2010.
- The latest CIAB survey showed that in fourth quarter of 2015, 57% of policies saw a rate decrease.
- The current 94% workers’ compensation combined ratio is the second lowest ever.
- Workers’ compensation loss ratios fell to 54% in 2015 which is the lowest level in many years.
- There was an increase in loss adjustment expenses which is being driven by California’s IMR process.
- The five year investment gain for the workers’ compensation industry is still below the long term average. Investment income continues to be a challenge.
- Because workers’ compensation is such a long-tail line, investment income is more important than it is in other insurance lines.
- NCCI estimates the workers’ compensation industry reserve deficiencies is $7 billion. Most of this is the tabular discounting allowed on long term payout claims.
- NCCI still expects continued workers’ compensation reserve development above industry projection for accident years 2006 through 2012.
- Over the last 20 years the total frequency decline seen is over 50%. In 2015 frequency declined over 3%.
- 2015 average cost per indemnity claim is $23,500, an increase of just over 3%. Indemnity severity has increased over 130% since 1995.
- In 1981 indemnity was 57% of total benefits paid. Now medical is just under 60% of total paid.
- Average medical cost per lost time claim dropped 1% in 2015 to $28, 500.
- Since 1995 medical costs per lost time claim have increased 214%.
- Since 2009 medical costs per claim have been closely aligned with overall increases in healthcare costs. Previously the medical costs in workers’ compensation were increasing at a pace significantly higher than overall healthcare costs.
- Prescription drug costs continue to rise and from 2011 to 2o14 drug costs increased by 25%.
- The residual market continues to shrink with larger accounts moving back into the traditional marketplace. As the residual market shrinks the combined ratios for this market tend to increase as only the worst risk remain in the residual marketplace.