A REVIEW OF CURRENT WORKERS COMPENSATION COSTS IN NEW YORK

Transcription

1 Consulting Actuaries A REVIEW OF CURRENT WORKERS COMPENSATION COSTS IN NEW YORK Scott J. Lefkowitz, FCAS, MAAA, FCA

2 CONTENTS Introduction... 1 Summary of the 2007 Legislation... 3 Consequences of the 2007 Legislation... 5 Assessments... 8 Closing Comments For additional information on the contents of this article, contact Oliver Wyman Actuarial Consulting, Inc. Scott J. Lefkowitz, FCAS, MAAA, FCA Oliver Wyman Actuarial Consulting, Inc. 48 South Service Road Suite 310 Melville, NY scott.lefkowitz@oliverwyman.com Scott J. Lefkowitz leads the Melville, NY office of Oliver Wyman Actuarial Consulting. He is a Fellow of the Casualty Actuarial Society, a Member of the American Academy of Actuaries, and a Fellow of the Conference of Consulting Actuaries. With over 27 years of experience in the insurance and risk management industry, Mr. Lefkowitz has provided consulting services to a wide variety of clients on all aspects of property/casualty risk exposure. Mr. Lefkowitz is an expert as respects workers compensation exposures, and currently researches workers compensation costs in a number of jurisdictions. OLIVER WYMAN ACTUARIAL CONSULTING CONTENTS

3 Introduction Following a period of accelerating workers compensation (WC) costs (benefits 1 ; claim related expenses 2 ; and assessments 3 ) in New York from 2000 to 2007, the state enacted legislation in 2007 with the expectation of materially reducing costs. Rather than decreasing costs, the 2007 legislation ultimately led to higher costs that exceeded pre-legislation levels. During the period from 2006 (the year prior to the legislation) through : - The incidence of permanent partial disability claims (PPD) in New York increased by 30%, while the countrywide incidence of PPD claims decreased by 14%. The relative incidence of PPD claims is currently 67% greater in New York than countrywide. - The incidence of lost time 5 (LT) claims in New York has been relatively constant, yet the countrywide incidence of LT claims has declined by 17% during the same period. - Rather than decreasing, as expected from the legislation, the average expected cost of a PPD claim in New York increased by 17%. The average expected cost of countrywide PPD claims increased by 8%. - The average benefit (indemnity and medical) cost of a LT claim in New York increased from $59,000 in 2006 to $85,000 in 2011, approximately 44%. During the same period, the average benefit cost of a countrywide LT claim increased from $44,000 to $47,000, approximately 7%. Note that current forecasts place the average benefit cost of New York LT claims in 2015 in excess of $100,000. This is prior to consideration of claim related expenses and assessment costs. - The average cost of claim related expenses in New York increased 26% from $5,600 per claim in 2006 to $7,100 per claim in Countrywide, the cost of claim related expenses increased 23%, from $4,700 in 2006 to $5,800 in Though the percentage increase to New York claim related expenses during this period was only marginally greater than countrywide metrics, the absolute cost of claim related expenses has been and remains materially greater in New York. - Collected assessments in NY increased from $516 million in 2007 to $963 million in Benefit costs include the cost of indemnity (wage replacement) benefits and medical benefits. 2 Claim related expenses refer to allocated loss adjustment expenses, also referred to as defense and cost containment expenses. In general, these include expense costs attributable to individual claims. The primary component of these costs is legal fees. 3 Assessments are surcharges paid to the Workers Compensation Board to fund various WC programs in NY. These programs are the Special Disability Fund (15-8), the Reopened Case Fund (25-A), the cost of running the Workers Compensation Board and other programs (151 and IDP), and the self-insurer s assessment (50-5). Only private (excluding public entities such as counties and municipalities) self-insured employers and groups pay the 50-5 assessment. 4 The most recently available insurance industry data is from LT claims involve lost work time and therefore include the cost of wage replacement benefits. LT claims include temporary disability claims, permanent partial disability claims, permanent total disability claims, and fatalities. Medical only claims (MO) are generally minor, low cost claims requiring short-term medical treatment with little or no lost work time and therefore no wage replacement benefits. Oliver Wyman estimates that the average benefit cost of a New York LT claim in 2015 will be over $100,000 while the average expected cost of an MO claim in New York is approximately $1,500. OLIVER WYMAN ACTUARIAL CONSULTING PAGE 1

4 Oliver Wyman s analysis of countrywide WC costs indicates that costs in New York are currently at levels commensurate with WC costs in California. These two jurisdictions represent the two 6 most expensive state jurisdictions in the United States. The purpose of this paper is to: 1. Briefly review the 2007 legislation; 2. Offer an explanation as to why both claim costs and assessments have increased since 2007; and 3. Discuss potential future cost levels. 6 The Oregon Department of Business and Consumer Services publishes a highly regarded biennial study that ranks each state according to WC costs. The Department released the most recent study in October of The top five states in the Oregon study are, in descending order, California, Connecticut, New Jersey, New York, and Alaska. The Oregon study is based on actual premium rate data, which therefore incorporates the variation of expense and profit provisions charged by different insurers. Additionally, the Oregon study utilizes a distribution of employee classifications reflective of Oregon employment. Oliver Wyman is in the process of completing a similar ranking, but based on the actual cost of benefits and claim related expenses, prior to the incorporation of any other expense, profit, or tax provision that are typically included in premium rates. The Oliver Wyman study uses a more general countrywide average distribution of employers, rather than a distribution specific to Oregon. Finally, the Oliver Wyman study uses the most recently available published cost of indemnity, medical and claim related expense costs in each state, and is therefore based on somewhat more recent data than the Oregon study. The general ranking of the Oliver Wyman study is quite similar, but not precisely the same, as the Oregon study. The Oregon study can be found at: OLIVER WYMAN ACTUARIAL CONSULTING PAGE 2

5 Summary of the 2007 Legislation Legislation enacted in 2007 included the following five key components: 1. Increase to the maximum and minimum weekly benefits. The maximum and minimum wage replacement benefits had been $400 and $40 per week since The legislation implemented a transition to a maximum benefit equal to 2/3 rds of the state average weekly wage (SAWW) effective July 1, 2010, updated annually from that point forward. The current maximum weekly benefit in New York is $ effective July 1, 2014, more than double the $400 in effect prior to the law change. The minimum weekly benefit increased to a fixed amount of $100 per week effective July 1, Elimination of lifetime permanent partial disability (PPD) awards. The primary cost driver in New York had been non-scheduled 7 PPD claims. Indemnity benefits for non-scheduled PPD claims accounted for 40% of total WC (medical and indemnity) benefit costs in New York. Prior to the legislation, benefits paid for non-scheduled PPD claims were for the duration of the disability, which in most circumstances translated into lifetime disability awards. The legislation capped the duration for all but the most serious non-scheduled PPD awards to a maximum of 525 weeks. 3. The Special Disability Fund (SDF or 15-8) was closed to new claims. The SDF mechanism reimburses employers for a portion or all of the benefit 8 cost of qualifying claims. Assessments provide funding for the SDF. SDF assessment costs increased from ~$400 million in 2001 to ~$600 million in The 2007 legislation closed the SDF to claims with dates of loss on or after July 1, In the short term, moderate cost increases were expected because insurers and self-insured employers must pay for claims that are no longer SDF eligible as well as pay for assessments required to fund claims in the SDF until all such claims are closed. In theory, over the longer term, decreasing assessments (as required SDF funding declines to zero) will exactly offset costs shifted back to insurers and self-insured employers. However, a realistic assumption that insurers and self-insured employers will manage claims for which they retain full financial responsibility more efficiently led to expectations of a net savings over the long term. Additionally, there were general expectations that closing the SDF to new claims would stabilize funding requirements, and therefore assessment costs. 7 Scheduled permanent partial disability claims provide for a specified number of weeks of benefits for loss of use of certain body parts, such as fingers, hand, leg, foot, etc. Non-scheduled claims would include back, neck, and injuries to body parts not otherwise listed on the published schedule. 8 Administration of claims approved for SDF relief remains the responsibility of the carrier or self-insured employer. The SDF reimburses employers for a portion or all of the benefit cost of these claims. Claim related expenses, such as defense, surveillance, court, or administration related costs, remain the financial responsibility of the carrier or self-insured employer. OLIVER WYMAN ACTUARIAL CONSULTING PAGE 3

6 4. The Aggregate Trust Fund (ATF) was expanded to include PPD claims. Prior to July 1, 2007, the ATF required an insurance carrier 9 to deposit the present value of future indemnity benefits for permanent total disability (PTD) claims and death claims. The deposit was avoided if the claim was settled within 6 months of disability classification. If the deposit occurred, the ATF attempted to settle the claim as well, but at lower settlement amounts than carriers with the ATF retaining the difference. The ATF requirement was not a material issue because PTD claims and fatalities represented a small portion of system benefit costs (~5%). The legislation expanded the ATF requirement to include PPD claims, which represent the bulk of WC costs in New York. The ATF mechanism generally favors claimants, though claimants and insurance carriers both benefit by avoiding an ATF deposit. The expectation was that expansion of the ATF would modestly increase costs. 5. Implementation of Medical Treatment Guidelines. The 2007 law provided for the implementation of medical treatment guidelines. The cost impact of this element of the 2007 law change was not estimated at the time the legislation was passed. Implementation of the guidelines began in Generally, the material cost increases associated with the increases to the maximum and minimum weekly benefits were expected to be more than offset by the material cost decreases associated with eliminating lifetime PPD awards, resulting in a substantial net cost savings 10. Additionally, closing the SDF to new claims was expected to stabilize funding and therefore assessment costs. In response to the legislation and based on these expectations, WC loss costs 11 decreased by 18.4% effective October 1, 2007, with an additional reduction of 6.4% implemented effective October 1, Initial expectations were overly optimistic. Since 2007, WC benefit costs in New York have increased to levels greater than the cost level prior to the 2007 legislation. Equally important, assessments required to fund the SDF increased by 50% from 2007 through 2013, and total assessments (for all programs) increased by almost 90% during this period, from approximately $516 million in 2007 to $963 million in The ATF requirement applies only to private insurance carriers. It does not apply to self-insured employers nor does it apply to the New York State Insurance Fund. 10 Other elements of the legislation were expected to increase (ATF expansion) or decrease (Medical Treatment Guidelines) costs. The change to the maximum and minimum weekly benefits and the elimination of lifetime PPD awards were the elements expected to have the greatest impact on costs. 11 Loss cost refers to the expected cost of benefits and claim expense per $100 payroll. Insurance companies subsequently factor in provisions for overhead, other expenses, and profit to generate a final premium rate. Loss costs are a direct measure of claim costs. Premium rates will generally increase (or decrease) by the same percentage change as loss costs, assuming no change to insurance company expense provisions. 12 Total assessment costs in 2006 were approximately $770 million (estimated based on Workers Compensation Board data). Assessments costs decreased in 2007 to $516 million, perhaps in anticipation of lower needs. This reduction was temporary, and by 2013 assessments had grown to $963 million, 25% above 2006 levels and almost 90% above 2007 levels. OLIVER WYMAN ACTUARIAL CONSULTING PAGE 4

7 Consequences of the 2007 Legislation 1. The increases to the maximum weekly benefit had a much greater impact on cost than originally anticipated due to increased utilization. The maximum weekly benefit almost doubled over the course of three years (from $400 per week effective June 30, 2007 to $ per week effective July 1, 2010) as mandated by the legislation. The impact on utilization was materially greater than anticipated. The following chart shows that PPD claim frequency increased by ~30% in New York from 2006 through Countrywide 13 PPD claim frequency decreased by ~15% during the same time period. Additionally, overall LT claim frequency in New York remained almost unchanged from 2006 through 2011, while countrywide LT claim frequency decreased by 17% during the same period. The legislation effectively halted the falling LT claim incidence that both New York and the rest of the United States experienced from 2001 through Subsequent to 2006, the incidence of all LT claims in NY has remained relatively constant, while LT claim incidence on a countrywide basis continued to decline. NEW YORK CLAIM FREQUENCY per 100,000 workers COUNTRYWIDE CLAIM FREQUENCY per 100,000 workers Policy Total Permanent PP % Policy Total Permanent PP % Year Lost Time Partial Year Lost Time Partial % , % % , % % , % % , % % , % % , % % % % % % % % % % % Note the material proportional shift in New York to expensive PPD claims. In 2006, 45% of all LT claims in New York were PPD claims. In 2011, this increased to 59%. On a countrywide basis, this proportion has been relatively constant since 2006, ranging between 37% and 41%. The shift to a greater percentage of PPD claims increased WC costs in New York. Additionally, this impact was amplified by material increases to PPD claim costs during this same time period. The following section addresses this latter item. 13 Years are approximate given that the individual states comprising countrywide data utilize data grouped into varying time-periods. OLIVER WYMAN ACTUARIAL CONSULTING PAGE 5

8 2. The cost of PPD claims, rather than decreasing subsequent to the law change, increased substantially. Permanent Partial Average Claim Costs Policy Years 2001 through 2011 New York versus Countrywide Medical and Indemnity Benefits Only Policy NY/Countrywide Year New York Countrywide Relativity ,719 71, ,505 68, ,666 70, ,142 67, ,457 69, ,395 71, ,061 75, ,992 76, ,506 76, ,718 76, ,352 77, The chart above compares PPD claim costs in NY to countrywide data, and shows that on a countrywide basis, PPD claim costs increased marginally from 2001 to In New York, PPD claim costs increased materially from 2001 to However, rather than decreasing, or stabilizing, after the 2007 legislation, PPD claim costs continued to increase. One reason for this increase is, obviously, the increase to the maximum weekly benefit. Weekly benefit payments, rather than being capped at $400 per week, are capped at over $800 per week, resulting in a large increase to the cost of permanent partial disability awards. However, another material causative factor is the greater willingness of claimants to extend the period of total disability prior to assignment of an impairment rating. This period is often referred to as the healing period. According to the New York Workers Compensation Board, the average time to disability rating in New York has increased from 4.8 years (prior to the 2007 law change) to 6.4 years (based on data measured last year). This adds, prior to consideration of any other associated cost, $50,000 to the cost of a claim (assuming a benefit of $600 per week on temporary total disability). Responsibility for this increase lies with both claimants, through their legal representation, as well as insurance carriers. As respects claimants, time on disability does not contribute towards duration caps until an impairment rating is issued. Given that the maximum weekly benefit has more than doubled due to the 2007 law changes, it is now economically feasible for some claimants to remain on total disability for an extended period. Insurance carriers contribute to this problem by delaying impairment ratings. On the surface, this behavior does not appear to be rational given that these delays materially increase the cost of claims. However, insurance carriers may be acting to delay impairment ratings to avoid the required large cash deposit into the OLIVER WYMAN ACTUARIAL CONSULTING PAGE 6

9 ATF if a claim is not settled within six months of establishing the rating. This latter issue emerged because of the expansion of the ATF to include PPD claims, which gives claimant attorneys greater leverage in settlement negotiations, by using the threat of a mandatory deposit into the ATF to secure larger settlements than otherwise might have been obtained. On the other hand, it should be noted that the ATF also motivates claimants to settle, given that once a deposit into the ATF is made, the ATF generally will act to settle claims at materially lower values than might have been offered by the carrier. Discussions with claims administrators indicate that while the ATF 14 deposit rule pressures both parties, the leverage favors claimants. 3. Medical Treatment Guidelines The Workers Compensation Board implemented initial guidelines in 2010, and implementation continues through today. Conversations with Oliver Wyman clients indicate that the guidelines may favorably impact costs over the longer term. In total, the overall impact of the 2007 legislation has been to materially increase costs primarily because of the resulting higher incidence of PPD claims as well as greater PPD claim costs. There is also a real concern regarding the viability of the 525 week limit on the duration of PPD claims. The law allows for claimants with an 80% or more loss of earnings capacity to apply for hardship lifetime permanent total disability awards. Claims professionals have expressed concerns that a greater proportion of claimants than anticipated by the 2007 law will, near the end of their claim, apply and receive hardship status. If the duration caps put into place by the 2007 legislation prove to be even partially ineffective, then costs may increase materially over current high levels. 14 The ATF rule applies only to employers insured by private carriers. It does NOT apply to self-insured employers nor does it apply to employers insured by the State Insurance Fund. Conversations with Oliver Wyman clients that are insured with large deductible insurance policies indicate that the ATF is a cost driver. However, both selfinsured and insured clients of Oliver Wyman have experienced similar material cost increases since the 2007 legislation. Therefore, while the expansion of the ATF to include PPD claims has likely contributed to cost increases, it is not clear whether this contribution is material in the context of other issues, such as delays to impairment ratings originating from claimants and overall system utilization. OLIVER WYMAN ACTUARIAL CONSULTING PAGE 7

10 Assessments There are five programs funded by assessments: 15-8 Special Disability Fund 25-A Reopened Case Fund 50-5 Self-Insurer Assessment IDP Interdepartmental Expenses 151 Workers Compensation Board Administration Descriptions of each assessment follow: IDP and 151 IDP and 151, provide for administration costs of the Workers Compensation Board and other occupational health and safety programs in New York. The combined collected assessments increased from $212 million in 2007 to $245 million in This translates into a reasonable annual increase of approximately 2.5% Special Disability Fund The assessment for the Special Disability Fund (closed to claims with dates of loss on or after July 1, 2007 by the 2007 legislation) increased marginally from levels in 2006 to $648 million in Required funding is expected to remain near this level in the immediate future, and then decrease over time until all claims in the fund close. This will occur over a 40+ year time horizon. 25-A Reopened Case Fund A material issue emerged with the Reopened Case Fund assessments totaled $314 million, roughly double the assessments in The increase in assessments reflected much greater utilization of the fund, perhaps spurred by the closure of the Special Disability Fund. Additionally, there was a material concern that an unintended consequence of the 2007 legislation would materially increase the potential pool of claims 16 that could be placed into 25- A. Because of this issue, as well as the large increase in assessments, the Reopened Case Fund was closed to new claims effective December 31, Required funding is expected to remain at or above the 2013 level for the immediate future, and then decrease over time until all claims in the Reopened Case Fund close. As with the Special Disability Fund, this is expected to occur over a 40+ year time horizon. 15 Total assessments in 2006 were approximately $164 million (estimated based on Workers Compensation Board data), dropping to $96 million in The reduction was temporary, and assessments grew to $314 million in 2013, almost twice 2006 levels and three times 2007 levels. 16 Prior to the 2007 legislation, non-scheduled PPD claims often resulted in lifetime disability awards with weekly benefit payments. These claims could not be placed into the Reopened Case Fund, which requires that a minimum of three years pass from the last wage-replacement payment, and that a minimum of seven years pass from the date of loss, before a claim could be considered for entry into the fund. Elimination of lifetime disability awards for all but the most serious of PPD claims effectively created a very large pool of claims that potentially would meet the requirements for entry into the fund for the purpose of funding injury related medical benefits. Medical benefits are provided as long as required, regardless as to whether wage-replacement benefits have expired or have been terminated due to an indemnity only settlement. OLIVER WYMAN ACTUARIAL CONSULTING PAGE 8

11 50-5 Self-Insurers This assessment provides for administration of the self-insurance market in New York and funding of benefit payments due to claims insured by insolvent self-insured employers and group trusts 17. Cash revenue required to fund 50-5 increased from $8.4 million in 2006 to over $27 million in A much smaller number of employers fund the larger cash requirement because of the closure of most group trusts since The impact is a materially greater cash burden on remaining self-insured employers. Legislation enacted in 2013, in addition to closing the Reopened Case Fund 18, simplified the extraordinarily complex manner by which assessments were levied. The legislation created a single unified assessment for 15-8, 25-A, 151, and IDP. Additionally, the legislation created a single assessment base for all employers, and relieved self-insured employers of the need to maintain a balance sheet accrual for future assessment payments 19. In 2014, the assessment percentage was 13.8% of standard premium for insured employers, or 13.8% of the standard premium equivalent 20 for self-insured employers. The 13.8% charge funds only 15-8, IDP, and 151. The Workers Compensation Board recently announced that that the assessment rate for 2015 is 13.2%. The 2014 and 2015 assessment rates do not include a provision for 25-A. Current 25-A expenditures are being funding by cash reserves. Within the next two years, additional assessment funding for 25-A will likely be required. However, the state is actively exploring approaches to mitigate the impact of future assessment needs. 17 In the mid-2000s, there were approximately 70 active self-insured groups. As of August 1, 2014, 3 are active, 34 are closed and in run-off, 23 are insolvent, with matters of other groups (either in run-off or insolvent) resolved by the Workers Compensation Board. Insolvency, in the context of the New York Workers Compensation Board, means there are no longer assets to fund benefit payments. Therefore, as time passes, it is likely that additional groups, currently in run-off, will exhaust their remaining assets and become insolvent. 18 The 2013 legislation also increased the minimum weekly benefit from $100 to $150 per week. 19 Prior to the 2013 legislation, insured employers paid an annual assessment based on their premium charge. The insurer collected the assessment charge and then paid the state. Self-insured employers, however, paid an assessment charge based on prior year indemnity payments. This meant that a self-insurer, even if it closed the self-insurance program, would still be obligated to pay assessments until all claims in the program closed. Therefore, self-insured employers had to maintain a balance sheet accrual for future assessments associated with future indemnity payments on prior claims. The 2013 legislation changed the assessment base for self-insured employers from indemnity payments to a standard premium equivalent, eliminating the need for a balance sheet accrual. The state now assesses self-insured employers in the same manner as insured employers for the 15-8, 15-A, IDP, and 151 assessments. However, the 50-5 assessment for self-insurers still uses indemnity payments as an assessment base. Therefore, a balance sheet accrual is still required for this single assessment. 20 The standard premium equivalent is equal to payroll (in units of $100) by employee classification multiplied by the appropriate manual loss cost published by the New York Compensation Insurance Rating Bureau. The justification for this approach is loss costs understate standard premium because loss costs do not include insurance company expenses and profit that are included in premium rates used by insurance carriers. On the other hand, the calculation does not give self-insured employers the benefit of the experience modification factor, which would act to reduce standard premium given that self-insured employers generally have better than average loss experience. OLIVER WYMAN ACTUARIAL CONSULTING PAGE 9

12 Closing Comments The following graph displays the components of LT claim costs in New York from 2001 through Values subsequent to 2011 are forecasts given that insurance industry data is currently available only through The assessment components include provisions only for the Special Disability Fund (15-8) and the Reopened Case Fund (25-A), as these represent the cost of claims that have been shifted from insurers or self-insured employers to the respective funds. Note that assessment charges in 2014 and 2015 provide only for the Special Disability Fund because the 13.8% unified assessment percentage does not include a provision for the Reopened Case Fund. The expectation is that funding for the Reopened Case Fund will be included in 2016 and subsequent years. The graph shows that the expected cost of all components of a LT claim in New York is in excess of $120,000 in OLIVER WYMAN ACTUARIAL CONSULTING PAGE 10

13 The following chart displays expectations regarding LT claim frequency in New York as well as the PPD percentage. Values subsequent to 2011 are forecasts based on recent data from Oliver Wyman clients. LT claim frequency is expected to remain stable, but the PPD percentage is expected to continue to increase until it stabilizes in NEW YORK CLAIM FREQUENCY per 100,000 workers Policy Total Permanent PP % Year Lost Time Partial , % , % , % , % % % % % % % % % % % % The preceding chart and graph show that WC costs in New York will continue to increase. As noted earlier, a material concern is the viability of the 525 week duration cap on PPD claims. If this cap proves to be even partially ineffective, the estimates of claim costs presented earlier will likely be understated, possibly materially, resulting in cost levels higher than presented in this paper. It is clear from data that has emerged since 2007 that the 2007 legislation, rather than decreasing WC costs in New York, greatly increased costs. Additionally, the cost of assessments to fund the claims in the Special Disability Fund and the Reopened Case Fund has grown from $516 million in 2007 to $963 million in In the shorter term, required funding is expected to remain at the 2013 level. Over the longer term, required funding will decline as claims in these funds close. This run-off will last in excess of 40 years. OLIVER WYMAN ACTUARIAL CONSULTING PAGE 11

14 For additional information on the contents of this article, contact Oliver Wyman Actuarial Consulting, Inc. Scott J. Lefkowitz, FCAS, MAAA, FCA Oliver Wyman Actuarial Consulting, Inc. 48 South Service Road Suite 310 Melville, NY The information contained herein is based on sources believed to be reliable, but Oliver Wyman does not guarantee the accuracy of its sources. It is general risk management and insurance information only. Oliver Wyman makes no representations or warranties, expressed or implied, concerning the financial condition, solvency, or application of policy wordings of insurers or reinsurers. The information contained in this publication provides only a general overview of subjects covered, is not advice regarding any individual situation, and should not be relied upon as such. Statements concerning tax, and/or legal matters are general observations based solely on our experience as risk consultants and should not be relied upon as tax and/or legal advice, which we are not authorized to provide. Readers of this document should consult their own qualified insurance, risk management, tax, and/or legal advisors regarding any specific issue discussed in this document. This document or any portion of the information it contains may not be copied or reproduced in any form without the permission of Oliver Wyman, except that clients of any of the companies of Marsh and McLennan Companies need not obtain such permission when using this report for their internal purposes, as long as this report is reproduced in its entirely, and this page is included with all copies and reproductions. OLIVER WYMAN ACTUARIAL CONSULTING PAGE 12

15 Consulting Actuaries Oliver Wyman Actuarial Consulting, Inc. is a practice of Oliver Wyman that specializes in property, casualty, life and health risk exposures. We provide independent, objective advice combining a wide range of expertise with specialized knowledge of the unique risk exposures of our clients. With almost 100 credentialed actuaries, we are one of the largest actuarial practices in North America. Oliver Wyman currently has actuarial consulting offices in Atlanta, Charlotte (NC), Chicago, Columbus (OH), Hartford, Houston, Los Angeles, Melville (NY), Milwaukee, Nashville, New York City, Philadelphia, Princeton, San Francisco, St. Michael (Barbados), and Toronto. Oliver Wyman Actuarial Consulting, Inc. 48 South Service Road Suite 310 Melville, NY

16 Consulting Actuaries Oliver Wyman Actuarial Consulting, Inc. 48 South Service Road Suite 310 Melville, NY