Workers' Comp Performance: Teamwork Will Tip The Balance in 2014
August 04, 2014| By Diane Brown |
There was a packed house at this year's National Council on Compensation Insurance (NCCI) Annual Issues Symposium to hear papers presented under the heading "Visualizing the Trends - An Industry Snapshot." As usual, presentations were rich in numbers and this year the stats were delivered with cautious optimism to an attentive industry audience.
Against a positive backdrop of premium increases, investment growth, falling claim frequency and moderating loss severity, concerns about the industry's net reserve deficiencies persist, along with worries around the Terrorism Insurance Act (TRIA) renewal and the uncertain impact of the Affordable Care Act.
In his "state of the line" address, NCCI president and CEO Stephen Klingel, described the WC outlook as "balanced," meaning that there's a reasonable expectation for some level of profit, and that WC systems in most states are operating effectively and efficiently.
But it fell to NCCI chief actuary Kathy Antonello to present the 2013 preliminary results, based on data from private insurance carriers, NCCI-affiliated state funds and other state funds. Here are Kathy’s headline findings:
- WC net written premiums were up 5.4% to $37 billion and total WC premium increased to $41.9 billion when State Funds’ premiums are added.
- The 2013 CY combined ratio was 101% for private carriers, an improvement of seven basis points from 108% for 2012, and 14 basis points from the 115% for 2011. State Funds posted a combined ratio of 115%.
- The 2013 AY combined ratio (private carriers) was 99%, down from 108% in 2012.
- Investment growth was 15% for 2013, with the caveat that this return was primarily on “older” invested dollars. Concern remains for the “newer” invested monies.
- Operating gain for 2013 rose sharply to 14%, up from 5.6% in 2012 and the negative “gain” in 2011. For context, the 2000-2011 period saw an average 3.7% gain.
- Net WC reserve deficiencies stayed high at $11 billion in 2013. Net of tabular discount the reserve deficiency was $6 billion.
- WC claim frequency continued its downward trend, although not as steeply as in 2012. Frequency declined 2% (-2%) in 2013, compared to 6.1% (-6.1%) in 2012.
- Severity (average cost per lost-time claim) increased slightly for indemnity (+2%); for medical it increased at the same annual rate as the previous year (+3%). The annual indemnity increase averaged +4.8% for the years 1995–2012, and for the same period, the annual medical increase was +6.7%.
From a purely subjective point of view it seems to us that more carriers are benefitting from pulling together across all the important disciplines: underwriting, claims and loss control. With more insurers following this trend for teamworking, 2014 could really tip the balance.
Read my recent Viewpoint article for more on the findings from the National Council on Compensation Insurance (NCCI) Annual Issues Symposium.