NCCI State of Line Report
On May 11, 2021, NCCI held their Annual Issues Symposium. NCCI is the largest workers’ compensation rating agency representing 34 states, which is the data used in their analysis. The main event of the Annual Issues Symposium is always their State of the Line Presentation. Here are some highlights from that presentation:
- Net written premium is down 10% in 2020 vs 2019. This is due to the significant decline in payroll caused by the pandemic.
- The private carrier calendar year combined ratio was 87% which is about a 2% increase from 2019. This makes four years in a row with a calendar year combined ratio below 90%. Calendar year combined ratio is really a cash flow measurement that is impacted by reserve releases from prior accident years and booking investment gains/losses.
- Private carrier accident year combined ratio for 2020 was 100%. This is up 3% from 2019. This is the first time since 2012 that the combined ratio was 100% or higher. The accident year combined ratio is a good measure of the expected underwriting profitability for that accident year.
- Claim frequency excluding COVID claims was down 7% from 2019. If you factor in the COVID claims, the decline was 2%, which is more in line with prior years.
- Indemnity claim severity increased 3%. This is a measure of the average cost per indemnity claim. This has trended upwards for many years.
- NCCI notes a 7.4% increase in average weekly wage, but this is deceptive and a result of job losses in lower-paying service industry jobs vs. wage growth.
- Workers’ compensation was the only property & casualty line that saw a premium decrease in 2020, reflecting the direct link between job losses and premiums.
- Over the last 20 years, workers’ compensation medical costs have increased at a rate double medical inflation over the same time period. This gap has narrowed in the last few years.
- Most COVID claims were small, and healthcare workers and first responders represented 75% of all claims.
- COVID claims above $100,000 incurred represent 1% of the total claims incurred, but more than 60% the total incurred losses.
Finally, NCCI highlighted the issues they are monitoring closely for the future. These were:
- Future COVID claims
- Will we see another spike of infections in the fall and a corresponding spike in new workers’ compensation claims?
- Job growth/premium growth
- When and to what extent will the economy recover?
- Long COVID claims
- Numerous studies are coming out which highlight potential long-term symptoms for those infected by COVID. These symptoms can even happen for those who only had a mild case of COVID. Will this lead to further development on COVID workers’ compensation claims?
- Impact of presumptions
- COVID presumption laws changed one of the basic elements of workers’ compensation, the burden of proof. Many of these laws applied retroactively. Will we see more of these laws, and how will they impact future disease outbreaks?
- Impact of vaccines
- Will vaccines prevent another spike in COVID cases, and will they reduce/eliminate future COVID symptoms?
You can review the complete NCCI 2021 State of the Line report here.