Introduction to Financial Data Reporting. Page 1 of 20

Transcription

1 Introduction to Financial Data Reporting Page 1 of 20

2 LESSON 1: OBJECTIVES To understand the critical role that NCCI plays in the workers compensation industry To gain an understanding of what Financial Call data is and how it is used To learn the Financial Call data reporting requirements, including which Financial Calls are collected by NCCI To understand the difference between Ratemaking and Supplement to Ratemaking Calls To learn why Financial Call data must be reported in a timely and quality manner Page 2 of 20

3 NCCI S INDUSTRY ROLE National Council on Compensation Insurance, Inc. (NCCI) plays a critical role in delivering rating organization and/or statistical agent services on behalf of insurance departments, independent bureaus, and NCCI affiliates in nearly 40 jurisdictions. In these jurisdictions, NCCI offers insurers an efficient, effective single point of collection and management of all key workers compensation information. NCCI operates as a not-for-profit rating, statistical, and data management services organization. As the manager of the nation s largest database of workers compensation information, NCCI collects detailed information on up to 50% of the total workers compensation claims and policies filed in the United States. This data is then used to support the delivery of advisory/rating services, production of experience modifications, administration of residual markets, estimation of impact proposed legislative reform, and maintenance of workers compensation plans and rules on behalf of insurers, regulators, and employers. Page 3 of 20

4 FINANCIAL CALL DATA Financial Call data is derived from the issuance of workers compensation and employers liability insurance. Insurance companies that write workers compensation and employers liability policies must capture premium, loss, and expense information from these policies. This information may be stored in different systems, however, each company generally has a mechanism to aggregate premium, loss, and expense transactions. These aggregated transactions can then be used to account for a company s annual financials. Annual financials must be reported to the National Association of Insurance Commissioners (NAIC) and NCCI. The NAIC uses this aggregated information to verify a company s financial condition. NCCI uses this aggregated information as a basis for determining state loss cost and rate changes. State loss cost changes are determined by comparing losses to the premiums available for losses. State rate changes are determined by comparing losses and expenses to premiums. In NCCI s role, this aggregated information is requested from workers compensation insurance companies by NCCI. This request is known as a Call for Financial Data or a Financial Call. Page 4 of 20

5 FINANCIAL CALL DATA Financial Call data is aggregated workers compensation data on a company s financial performance. This data is produced from accounting information as reported on a company s annual financial statement. Financial Call data is reported by insurance companies and collected by NCCI annually, with the majority of the data due in March and April. Financial Call data, also referred to as Financial Calls or Annual Calls for Experience, is required for all companies that write workers compensation business in all states, including NCCI states. NCCI s Reporting Guidebook for Annual Calls for Experience* outlines detailed reporting rules and due dates for the 19 required Financial Calls. *To order Reporting Guidebook for the Annual Calls for Experience to report Financial Calls more efficiently, contact NCCI s Customer Service Center. Page 5 of 20

6 FINANCIAL CALL DATA NCCI uses Financial Call data for determining state loss cost or rate changes. NCCI proposes these changes through loss cost and rate filings submitted to insurance department regulators. Rate Filings include loss and expense information. Loss Cost Filings include loss information only. The majority of NCCI states are loss cost states. In NCCI s role as a ratemaking organization, it is critical for NCCI to receive quality Financial Call data on time, in order to use this data in loss cost and rate filings. Financial data varies from Unit statistical data, as Unit statistical data is used to distribute the overall rate change to individual classification and to produce experience rating. Page 6 of 20

7 FINANCIAL CALL DATA NCCI uses Financial Call data at state level for two purposes: Ratemaking and Supplement to Ratemaking. Ratemaking Once Financial Call data is aggregated by state, NCCI analyzes the information and determines what the overall loss cost or rate change should be for the respective state. NCCI then files and proposes this change with the state insurance department for approval or adoption. Supplement to Ratemaking NCCI analyzes aggregated Financial Call data for reasons other than ratemaking. Financial Call data supports market analysis and research and responses to state regulatory requirements. It also gives insurance companies an alternative option for reporting to the NAIC by allowing them to report premium and expense-related information to NCCI. Page 7 of 20

8 FINANCIAL CALL DATA Financial Call data is organized at a state level in two different ways based on different time frames. This data is captured on a Policy Year and Calendar-Accident Year basis. The Calendar-Accident Year includes aggregated Financial Call data for a specific period of time. Calendar-Accident Year experience reflects premium transactions that are earned in a given year along with loss experience for claims with accident dates beginning January 1 and ending December 31 of that year. Calendar-Accident Year 2002 includes premium that is earned in 2002 along with claims with accident dates that occurred in In the following example, the losses for Calendar-Accident Year 2002 would include Policies A and B because the claims occurred in The losses for Calendar-Accident Year 2003 would include Policy C because the claim occurred in 2003, regardless of the policy period. The premium information for Calendar-Accident Year 2002 would include Policies A, B, and C because the premium was earned in Policy Premium Transaction Date Accident Date Claim Amount (Losses) Earned Premium A 1/1/02 7/1/02 $50,000 $100,000 B 4/1/02 9/15/02 $75,000 $200,000 C 12/31/02 3/15/03 $100,000 $300,000 Page 8 of 20

9 FINANCIAL CALL DATA The Policy Year includes aggregated Financial Call data for a specific group of policies. It is composed of all policies with effective dates initiated within that year. For example, all premiums earned and losses incurred for policies with effective dates from January 1 to December 31, 2002, must be reported under the effective year (2002) regardless of the year the claim occurred. In the following example, the premiums and losses for Policy Year 2002 would include Policies A, B, and C because the policy effective dates were all in Policy Policy Effective Date Policy Expiration Date Claim Occurred Premium Claim Amount (Losses) A 1/1/02 1/1/03 7/1/02 $100,000 $50,000 B 3/7/02 3/7/03 9/15/02 $200,000 $75,000 C 12/31/02 12/31/03 3/15/03 $300,000 $100,000 REPORTING REQUIREMENTS All companies that write workers compensation insurance in NCCI jurisdictions must report Financial Call data to NCCI. NCCI maintains a state chart that provides up-to-date information on NCCI s data Page 9 of 20

10 collection roles and relationships for each state. (This state chart is located on ncci.com). Since some Financial Calls are state-specific, data providers must determine which Financial Calls apply to their company. The Financial Calls that are required by a company are determined by the state(s) that the company writes in, and the type of policies that they issue. Page 10 of 20

11 FINANCIAL CALLS NCCI collects the following Financial Calls in NCCI jurisdictions. Some calls are state specific. Due dates may vary amongst the calls. Call # Financial Call 1 Net Direct Written Premium 3 Policy Year 3A Policy Year Assigned Risk 5 Calendar-Accident Year 5A Calendar-Accident Year Assigned Risk 6 Insurance Expense Exhibit 8 Reconciliation Report 10 Supplemental Call for Schedule Rating Premium Adjustments 11 F-Classification Policy Year 12 Louisiana Calendar Year Senate Bill Calendar Year Expense Data 16 Maine Escrow Account 19 Countrywide Loss Adjustment Expense 20 Large Deductible Policy Year 21 Large Deductible Calendar-Accident Year 26 North Carolina Addendum for Calls 3, 5 and Texas Reconciliation Report and Supplemental Calls 30 Quarterly Call for Year-to-Date Calendar Year 48 Catastrophe Number 48 Note: To find detailed information on the reporting requirements and due dates of each Financial Call, refer to the Reporting Guidebook for Annual Calls for Experience. Page 11 of 20

12 RATEMAKING CALLS There are specific Financial Calls that are collected and used for ratemaking purposes by NCCI. These Financial Calls are known as Ratemaking Calls. Ratemaking Calls are comprised of the Policy Year Calls, the Calendar-Accident Year Calls, the Reconciliation Call, F Class Call, and Large Deductible Calls. Some are only required in specific states. The following details each Ratemaking Call. Call # 3 3A Policy Year Calls Financial Call Policy Year Data collected in this Call includes earned premium and incurred losses for statewide business captured in a policy year time frame. Data from this call is used in ratemaking to determine statewide loss cost or rate changes. Policy Year Assigned Risk Data collected in this Call includes earned premium and incurred losses for assigned risk business captured in a policy year time frame. Data from this call is used in ratemaking to determine assigned risk rate changes. Note: Assigned risk data subtracted from statewide data produces voluntary business only data and can be used in ratemaking to determine voluntary business only loss cost or rate changes. F-Classification Policy Year There are specific exposures assigned to 27 F-Classifications to insure federal coverage. Data collected in the F-Classification Policy Year Call includes earned premium and incurred losses for statewide F-Classification business. Large Deductible Policy Year Data collected in this Call includes earned premium and incurred losses for statewide large deductible coverage. Note: To find detailed information on what calls are required, refer to the Reporting Guidebook for Annual Calls for Experience. Page 12 of 20

13 RATEMAKING CALLS Call # 5 5A 21 Calendar-Accident Year Calls Financial Call Calendar-Accident Year Data collected in this Call includes earned premiums and incurred losses for statewide business captured in a Calendar-Accident Year time frame. Data from this call is used in ratemaking to determine statewide loss cost or rate changes. Calendar-Accident Year Assigned Risk Data collected in this Call includes earned premium and incurred losses for assigned risk business captured in a calendar-accident year time frame. Data from this call is used in ratemaking to determine assigned risk rate changes. Note: Assigned risk data subtracted from statewide data produces voluntary business only data and can be used in ratemaking to determine voluntary business only loss cost or rate changes. Large Deductible Calendar-Accident Year The data collected in this Call includes earned premiums and incurred losses for assigned risk large deductible coverage. Call # Financial Call 8 Miscellaneous Call Reconciliation Report The Reconciliation Report includes Calendar Year Net Direct Earned Premium and Incurred Losses. This report reconciles data that NCCI uses for ratemaking with data reported on Statutory Page 14 of a company s Annual Statement. Note: To find detailed information on what calls are required, refer to the Reporting Guidebook for Annual Calls for Experience. Page 13 of 20

14 SUPPLEMENT TO RATEMAKING CALLS There are specific Financial Calls that are collected and used to supplement ratemaking purposes by NCCI. These Financial Calls are know as Supplement to Ratemaking Calls. Some are only required in specific states. The following details each of these calls. Call # Financial Call Net Direct Written Premium Includes Calendar Year Net Direct Written Premiums. This call is not required for companies that submit their Annual Statements to the NAIC. Insurance Expense Exhibit NCCI uses data from this Call in its annual review of expenses to establish the provisions for general expenses and loss adjustment expenses (LAE) used in loss cost and rate filings. If companies submit this data to the NAIC, they are not required to report this data to NCCI. Supplemental Call for Schedule Rating Premium Adjustments NCCI uses this Call to verify that carriers have properly accounted for Schedule Rating in their other Call submissions used in the ratemaking process. Compilations of this data are also used in market analysis to measure the impact of this form of competitive pricing. Louisiana Calendar Year Senate Bill 14 The most recent calendar year data must be reported for Louisiana only. This data is collected by NCCI, which is charged with the responsibility of collecting and providing aggregated information to the Louisiana Insurance Rating Commission as required by Senate Bill 14. Note: To find detailed information on what calls are required, refer to the Reporting Guidebook for Annual Calls for Experience. Page 14 of 20

15 SUPPLEMENT TO RATEMAKING CALLS Call # Financial Call Calendar Year Expense Data The most recent calendar year expense data must be reported on a state basis. The purpose of collecting this data is to help support expense allowances in loss cost and rate filings. In selected jurisdictions, data from this Call is provided to regulators in conjunction with loss cost and rate filings. Also, this expense data is used in research, such as studies of defense and cost containment expense by state. Maine Escrow Account The approved advisory loss cost filings in Maine in 2001 and 2002 included a provision to set aside specified collected premium into an escrow account. The premium in this escrow account covers increases in weekly benefits duration that have not yet been enacted by the Maine Workers Compensation Board. If they are not enacted, this escrow account premium will need to be returned to policyholders. Countrywide Loss Adjustment Expense The intent of this Call is to collect accumulated accident year loss adjustment expense (LAE) information on a direct basis for the purpose of calculating the loss adjustment expense provision included in the NCCI manual rates. Includes experience for Large Deductible policies. North Carolina Addendum for Calls 3, 5 and 19 These addenda are intended to collect accumulated claim counts for both indemnity and medical-only claims. Note: To find detailed information on what calls are required, refer to the Reporting Guidebook for Annual Calls for Experience. Page 15 of 20

16 SUPPLEMENT TO RATEMAKING CALLS Call # Financial Call Texas Reconciliation Report and Supplemental Calls NCCI is designated as the workers compensation statistical agent for the Texas Department of Insurance (TDI). In this role, NCCI collects and forwards financial data to TDI, along with certain standard reports specified by TDI. Quarterly Call for Year-to-Date Calendar Year This Call collects information on premium, losses, and expenses on a quarterly basis from the top writers in each state. This Call is not required for all companies. If a company is required to report this Call, NCCI will send a letter of notification to the company. Catastrophe Number 48 Claims to be reported using Catastrophe Number 48 include all those workers compensation claims directly attributable to the September 11, 2001 attacks on the World Trade Center, the Pentagon, and in Pennsylvania. Included claims are those attributable to these attacks with accident dates of September 11 through September 14, Note: To find detailed information on what calls are required, refer to the Reporting Guidebook for Annual Calls for Experience. Page 16 of 20

17 FINANCIAL CALL REPORTING EXAMPLES The states that a company writes in, and the type of policies issued, determine which Financial Calls that company must report. The following are various scenarios that could occur based on the state(s) and type of policy: Scenario 1 GA LA TN States 2 AK GA RI Assigned Risk Type of Policy Large Deductibles F-Classification Financial Calls Required Yes No No Policy Year Call Policy Year Assigned Risk Call Calendar-Accident Year Call Calendar-Accident Year Assigned Risk Call Reconciliation Call Supplemental Call for Schedule Rating Premium Adjustments Louisiana Calendar Year Senate Bill 14 Yes Yes Yes Policy Year Call Policy Year Assigned Risk Call Calendar-Accident Year Call Calendar-Accident Year Assigned Risk Call Reconciliation Call Supplemental Call for Schedule Rating Premium Adjustments Large Deductible Policy Year Large Deductible Calendar-Accident Year Call # 3 3A 5 5A A 5 5A Page 17 of 20

18 TIMELY AND QUALITY FINANCIAL CALL DATA Financial Call data is critical for providing the source data that is used in NCCI s state loss cost and rate filings. These state filings are made according to a predetermined schedule and require complete, accurate, and verified data. NCCI s formula for success as a ratemaking organization depends on each company s contributions to the following process: Quality Data Reported + Reported Timely + Reported Electronically = Improved Ratemaking Process Page 18 of 20

19 AGGREGATE DATA QUALITY INCENTIVE PROGRAM (ADQIP) The Aggregate Data Quality Incentive Program (ADQIP) gives data providers an incentive to report aggregated Financial Call data to NCCI in a timely and accurate manner. Specifically, data providers are eligible to receive early reporting credit if their data meets this formula: Calls Reported Early + Pass Data Quality Editing = Eligible for Early Reporting Credits ADQIP offers credits for early reporting of the following Ratemaking Calls: Policy Year Call (3) Calendar-Accident Year Call (5) ADQIP reallocates the costs of late and/or inaccurate reporting back to data reporters that are not reporting financial data in a timely and accurate manner. Monetary assessments are levied on external customers for Financial Calls that are not received by NCCI on or before the required date, as well as calls that contain errors. ADQIP applies in all states under the jurisdiction of NCCI (except for Texas). The Quality Incentive System (located at ncci.com) is a comprehensive Internet-based application that data providers use to view the timeliness of financial data submissions, as well as the calculation of any applicable ADQIP lateness fines for those calls received after their due date. Page 19 of 20

20 FINANCIAL CALL ACKNOWLEDGEMENT In NCCI s continuing focus on data quality, a new acknowledgement process was implemented for the Policy Year and Calendar-Accident Year Calls. This new process requires a designated actuary (who must be a member of the American Academy of Actuaries and/or the Casualty Actuarial Society) or a company officer to acknowledge the completeness and accuracy of the Policy Year, Calendar-Accident Year Call, and Reconciliation Call data. For more details of the acknowledgement process, refer to the Reporting Guidebook for the Annual Calls for Experience. Page 20 of 20