NCCI State of the Line Report

At the 2018 NCCI Annual Issues Symposium, Kathy Antonello, Chief Actuary for NCCI, gave the State of the Line presentation. The highlights:

• Last year brought double-digit rate decreases in almost half of the NCCI states.
• Tax reform is having a significant impact on the workers’ compensation line.
• Workers’ compensation net written premiums dropped 0.7% to 39.8 billion in 2017 compared to 2016. This was the only property and casualty commercial line that saw a decrease in premiums.
• The major factors in the drop in worker’s compensation premiums were an increase in premiums ceded to reinsurers both off-shore and domestic, little to no change to premium rates, and payroll growth has been offset by loss-cost decreases.
• Workers’ compensation combined ratios dropped from 94% in 2016 to 89% in 2017. This is the lowest combined ratio in workers’ compensation since the 1950.
• Surplus for commercial P/C carriers increased to a record level of $749 billion. This is in spite of 2018 being a record year for catastrophic losses.
• The residual market share of the market has held stable at around 8%. However, there was a decrease in the number of larger accounts (over $100,000 premium) in the residual market.
• Premiums increased in Florida by 15%. This was based on the prior case law invalidating significant elements in their workers’ compensation law.
• California had the biggest impact on the nationwide change in premiums because of significant premium decreases in the state.
• Changes in payroll have been impacted by both wage growth and employment growth. The overall growth of 3.4% is a combination of 1.6% wage growth and 1.8% employment growth.
• NCCI filings approved as of May 10 will decrease 2018 premiums by over 9%.
• Continued decreases in claim frequency plus moderation in severity is resulting in lower rates.
• According to a CIAB pricing survey, 12% of accounts in Q4 2017 saw rate increases. Most saw a decrease or were flat.
• Workers’ compensation combined ratios have been dropping steadily since 2010 when the combined ratio was 115%.
• Combined ratio elements loss ratios, loss adjustment expenses are slightly down, while underwriting expense ratio and dividend ratios were up slightly.
• Investment income gains on insurance transactions is 12%. This is in line with prior years.
• The workers’ compensation pretax operating gain for 2017 was 23%. This is the highest level in many years.
• The calendar year combined ratio for 2017 was 89% while the accident year combined ratio was 99%. The accident year combined ratio increased by 4%. NCCI expects this accident year combined ratio to develop downward over time.
• NCCI estimates the current industry reserve deficiencies at around $1 billion. This is the lowest level in many years and represents only 1% of calendar year reserves.
• Lost time claim frequency for NCCI states declined 6% for 2017. This is very close to the decrease from 2016.
• Motor vehicle accident claims are increasing in frequency, and these claims tend to have high costs.
• Bureau of labor statistics and NCCI data on claim frequency have both trended downward for many years.
• Claims over $1 million are less than 1% of the total claims but over 7% of costs. The trend is that frequency and severity of larger claims is increasing.
• Indemnity claim severity continues to outpace wage inflation.
• Average indemnity claim severity has increased in most states 2012-2016. The exceptions were Tennessee and Oklahoma that had significant law changes during this time.
• The average medical lost time cost severity went up 4% compared to 2016. The medical costs have gone up at rates greater than medical inflation, although in recent years these two measures are tracking much closer.
• North Carolina has seen a decrease in medical costs because of fee schedule changes.

You can view the full PowerPoint from the State of the Line presentation at the NCCI web site. NCCI.com