CONNECTICUT. October 5,

Transcription

1 CONNECTICUT October 5,

2 Opening Remarks Economic Outlook: Countrywide and Connecticut Workers Compensation System Overview: Countrywide and Connecticut Filing Activity Claim Frequency Claim Severity: Indemnity and Medical Guest Speaker: Tim Hassett-Salley, WCRI Legislative Issues: Federal, Countrywide, and Connecticut Residual Market Closing Remarks Connecticut Workers Compensation State Advisory Forum 2

3 State of Connecticut Workers Compensation Market IMPROVED RESULTS 3

4 Countrywide Economic Outlook

5 National Economic Highlights and Their Impact on Workers Compensation National Economic Indicator Private employment is expected to continue to grow slowly Wage growth is poised to accelerate Medical inflation is trending up In December 2015, the Federal Reserve began raising the federal funds rate Potential Impact on the Workers Compensation Market Premium increases from higher payroll and higher expected claim frequency for new workers Upward pressure on payroll and premium as well as indemnity severity Increased pressure on medical costs per claim Higher interest rates mean better returns on invested funds 5

6 Forecast is for Continued but Slowing Growth Near 2% in the Private Sector Annual Growth Rate Percent 3 US Private Employment Growth f 2017f f Forecast Private Nonfarm Employment Frequency of observation: annual; latest historical data point: 2015; forecast years: 2016 and 2017 Sources: US Bureau of Labor Statistics (BLS); Moody s Analytics 6

7 Annual Growth Rate Percent 5 Wages are Forecast to Accelerate Significantly by 2017 US Average Weekly Wage Growth f 2017f f Forecast Wages are for Total Private Industry Frequency of observation: annual; latest historical data point: 2015 (preliminary); forecast years: Sources: US Bureau of Labor Statistics (BLS); Moody s Analytics; NCCI 7

8 The US Unemployment Rate Continues to Decline, but is Higher When Marginally Attached Workers are Included Percent 20 US Headline Unemployment Rate and U U-6 Unemployment Headline Unemployment U-6 measures the number of the unemployed, the marginally attached, and the part-time for economic reasons Headline (official) unemployment rate and U-6 are seasonally adjusted Frequency of observation: monthly; latest available data point: June 2016 Sources: Moody s Analytics; US Bureau of Labor Statistics (BLS) 8

9 Percent 4 Medical Inflation is Forecast to Accelerate This Year and Next US Medical Consumer Price Index Growth Rate f 2017f f Forecast Medical Care Consumer Price Index, Urban Consumers Frequency of observation: annual; latest historical data point: 2015; forecast years: 2016 and 2017 Sources: US Bureau of Labor Statistics and Moody s Analytics 9

10 Interest Rates are Expected to Increase in Year Treasury Notes Percent f f Forecast Frequency of observation: interest rate as of June Latest historical data point: June 2016 Sources: Federal Reserve Board and Moody s Analytics 10

11 Current Economic Headlines National Economic Highlights and Their Impact on Workers Compensation National Economic Indicator Oil and natural gas prices are low Economic weakness in Europe and China should keep the dollar strong Housing starts are increasing Potential Impact on the Workers Compensation Market Low energy prices benefit most producers, a positive for workers compensation since manufacturing accounts for 16% of premiums. However, layoffs in the energy sector negatively impact energy-dependent states. A strong dollar may cut employment in exportcentric industries, particularly equipment manufacturing and technology. This is a negative due to the large share of premiums in manufacturing. New residential construction should boost demand for construction workers, a positive since construction accounts for 24% of premiums. 11

12 How Does the Connecticut Economy Compare?

13 Change in Private Employment Private Employment Growth is Below Average Percent 3 May-14 May-15 May Connecticut United States Private Nonfarm Employment, seasonally adjusted Frequency of observation: monthly; latest available data point: May 2016; percentage change for the 12 months ending each May Source: US Bureau of Labor Statistics (BLS), 13

14 Change in Private Employment Comparison of Private Employment Growth Across States 14 Private Nonfarm Employment, seasonally adjusted Frequency of observation: monthly; latest available data point: May 2016; percentage change for the 12 months ending May 2016 Source: US Bureau of Labor Statistics (BLS), 14

15 Change in Employment by Industry Employment in Most Industries has Increased in the Past 12 Months Industrial Sector 12-Month Percent Change, May 2016 Sector Size % Share 12-Month Change Information Construction Other Services Financial Activities Manufacturing Professional and Business Services Education and Health Services Leisure and Hospitality Trade, Transportation, and Utilities Government Natural Resources and Mining CT , ,200 US 0.1 CT , ,400 US +3.4 CT , ,200 US +1.0 CT , ,300 US +2.0 CT , ,800 US 0.3 CT , ,300 US +2.7 CT , ,800 US +3.0 CT , ,000 US +2.5 CT , US +1.6 CT , US +0.5 CT US 15.4 Percentage change for the latest 12 months as of May 2016 Current Employment Statistics Survey, seasonally adjusted; frequency of observation: monthly Source: US Bureau of Labor Statistics (BLS), 15

16 Change in Average Weekly Wages Wage Growth is Below the Rest of the Nation Percent Connecticut United States Wages are for Total Private Industry Frequency of observation: annual; latest available data point: 2015 (preliminary) Source: US Bureau of Labor Statistics (BLS), 16

17 Headline Unemployment Rate The Unemployment Rate is Above the National Average Percent May-14 May-15 May Connecticut United States Headline unemployment rate, seasonally adjusted Frequency of observation: monthly; latest available data point: May 2016 Source: US Bureau of Labor Statistics (BLS), 17

18 Connecticut Economic Highlights Connecticut s unemployment rate is above the US rate Employment growth is below the US rate: Information is the top-performing sector in the state in terms of percentage change Education and Health Services added the most jobs followed by Financial Activities and Professional and Business Services Government and Natural Resources and Mining have declined Connecticut wage growth is below the US average 18

19 AIS Presentation Video Excerpt Bill Donnell NCCI President and CEO

20 Workers Compensation System Overview: Countrywide and Connecticut

21 State of the Workers Compensation Market Combined ratios: Underwriting gains achieved on both calendar year and accident year bases Net written premium volume increased for the fifth consecutive year Lost-time claim frequency again decreased Lost-time claim severity changes were small increasing for indemnity and decreasing for medical Residual market premium remains manageable 21

22 $ Billions Countrywide Net Written Premium Growth Continued State Funds ($B) Private Carriers ($B) Private Carriers and State Funds p Calendar Year p Preliminary Source: Annual Statement data Includes state insurance fund data for the following states: AZ, CA, CO, HI, ID, KY, LA, MD, MO, MT, NM, OK, OR, RI, TX, and UT Each calendar year total for state funds includes all funds operating as a state fund in that year 22

23 United States Employment Levels Index: 2010 = 100 Index of Payroll Index of Construction Employment Index of Real GDP Index of Employment Index of Manufacturing Employment Sources: US Bureau of Labor Statistics and US Bureau of Economic Analysis 23

24 Percent Countrywide Impact of Discounting on Premium NCCI States Private Carriers p Policy Year p Preliminary Sources: Annual Statement Statutory Page 14 and NCCI s Financial Call data NCCI benchmark level does not include a profit and contingency provision Based on data valued as of 12/31/2015 for all states where NCCI provides ratemaking services, excluding TX 24

25 Countrywide Impact of Discounting on Premium NCCI States Private Carriers Dividends Schedule Rating Rate/Loss Cost Departure p Policy Year p Preliminary Sources: Annual Statement Statutory Page 14 and NCCI s Financial Call data Dividend ratios are based on calendar year statistics NCCI benchmark level does not include a profit and contingency provision Based on data valued as of 12/31/2015 for all states where NCCI provides ratemaking services, excluding TX 25

26 Countrywide Net Combined Ratios Calendar Year vs. Accident Year as Reported Private Carriers p Calendar Year Accident Year p Preliminary Source: NCCI analysis based on Annual Statement data Accident Year information is reported as of 12/31/2015 Includes dividends to policyholders 26

27 Connecticut Workers Compensation System An Overview Claim frequency continues to decline Accident Year Combined ratio improves Premium volume continues to rise Average indemnity and medical costs declined in the latest year 27

28 Connecticut Premium Volume Direct Written Premium in $ Millions $732 $731 $693 $593 $606 $680 $737 $818 $868 $ p Calendar Year p Preliminary Source: NAIC Annual Statement data 28

29 Connecticut Impact of Discounting on Premium Percent 10% 5% 0% -5% -10% -15% -20% -25% -30% -19.3% -23.5% -26.3% -27.4% -21.9% -16.0% -1.2% -3.0% 2.8% -0.5% -1.3% -5.2% -4.5% -4.2% -8.1% -6.1% -8.4% -9.2% -9.5%-9.8% p Policy Year Rate/Loss Cost Departure Schedule Rating Dividends Totals Based on data through 12/31/2015 Dividend ratios are based on calendar year statistics 29

30 Connecticut Accident Year Combined Ratios 125% 113% 102% 97% 94% Sources: NCCI s financial data, NAIC Annual Statement data Accident Year 30

31 Results Vary From State to State Accident Year 2014 Combined Ratios WV OK TX AR KS DC IL SD NH NV IN MT NM IA MS NE AZ FL NC VT CT TN ID UT LA MO VA AL SC GA HI CO RI AK KY MD ME OR Data is evaluated as of 12/31/

32 Filing Activity

33 Countrywide Workers Compensation Approved Changes in Bureau Premium Level By Effective Year for NCCI States Percent 5 Cumulative Change of 20.3% ( p) p Calendar Year p Preliminary Bureau premium level changes reflect approved changes in advisory rates, loss costs, assigned risk rates, and rating values, relative to those previously approved in NCCI states only IN and NC are filed in cooperation with state rating bureaus 33

34 NCCI Voluntary Market Filing Activity Number of State Loss Cost/Rate Filings by Filing Season /2014 Season 2014/2015 Season 2015/2016 Season 2016/2017 Season Less Than 0% No Filing 0% and Greater 34

35 2016/2017 Filing Cycle NCCI Voluntary Market Filing Activity Data for 21 states was reviewed 20 states filed a decrease 1 state filed a change of 0% or greater 0 states did not submit a filing Range of voluntary filings: 14.7% to +1.3% Based on data evaluated as of 12/31/

36 Current NCCI Voluntary Market Loss Cost/Rate Level Changes Percent Excludes Law-Only Filings WV NC IL AZ TN AL CT OK MD TX IN NH NM KS MS RI OR AK NV VA KY FL IA AR DC MO MT LA UT CO SD NE ME ID HI SC VT GA Approved Pending Reflects the most recent experience filing in each jurisdiction Due to the timing of the individual loss cost/rate filings, the figures shown may include changes from prior filing seasons 36

37 Current Voluntary Market Rates/Loss Costs Northeastern NAIC Zone New York 10/1/ % Vermont 4/1/ % Massachusetts 7/1/ % Maine 4/1/ % New Jersey 1/1/16 0.0% Rhode Island 8/1/16 7.5% New Hampshire* 1/1/17 9.0% Connecticut* 1/1/ % *Pending 37

38 Percent Connecticut Filing Activity Voluntary Loss Cost and Assigned Risk Rate Changes ^ * Calendar Year Voluntary Assigned Risk ^Law-only filing 4/1/2015 *Pending filing Copyright 2016 NCCI Holdings, Inc. All Rights Reserved. 38

39 Connecticut January 1, 2017 Loss Cost Filing Overall Loss Cost Level Change -10.9% Changes due to: Experience -9.4% Trend 2.6% Benefits +0.7% LAE +0.3% 39

40 Connecticut January 1, 2017 Filing Average Changes by Industry Group Manufacturing -12.1% Contracting -12.7% Office and Clerical -12.2% Goods and Services -9.1% Miscellaneous -10.7% Overall -10.9% 40

41 Summary of January 1, 2017 Proposed Change in Assigned Risk Rates Voluntary Loss Cost Level Change -10.9% Change in Assigned Risk Multiplier 0.0% Change in Assigned Risk Rate Level -10.9% 41

42 Cumulative Loss Cost Level Change (%) Connecticut Filing Activity Cumulative Loss Cost Level Change from /93 7/93 7/94 7/95 1/96 1/97 1/98 1/99 1/00 1/01 1/02 1/03 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13 1/14 1/15 4/15 1/161/17* Effective Date *Filed but not yet approved Indexed to 1993 base year Copyright 2016 NCCI Holdings, Inc. All Rights Reserved. 42

43 Average Voluntary Pure Loss Cost Quartiles Using Connecticut Payroll Distribution by Class WA CA OR NV ID AZ UT MT WY CO NM ND SD NE KS OK MN WI IA IL MO AR MS MI OH IN KY TN GA AL OK WV NC SC PA VA NY NH VT ME RI CT NJ DE MD DC MA $0.34 $0.64 $0.65 $0.74 $0.75 $0.90 TX LA $0.91 $1.26 AK FL Not Included HI Countrywide = $0.72 Connecticut = $1.26 Based on the latest NCCI approved rates and loss costs in the various states 43

44 Claim Frequency

45 Percent Countrywide Lost-Time Claim Frequency Changes Change in Lost-Time Claims per $1M Pure Premium Private Carriers and State Funds 10 5 Cumulative Change of -51.5% ( ) p Accident Year 2010 and 2011 adjusted primarily for significant changes in audit activity p Preliminary based on data valued as of 12/31/2015 Source: NCCI s Financial Call data, developed to ultimate and adjusted to current wage and voluntary loss cost level, excludes highdeductible policies; : based on data through 12/31/2014 Includes all states where NCCI provides ratemaking services; WV is excluded through 2014, but included in

46 Frequency Index Countrywide Lost-Time Claim Frequency by Size of Total Loss Quintiles Cumulative Changes 2008 to 2014 All Claims: -11% Claims above $50k: -14% K 3K - 10K 10K - 20K 20K - 50K 50K - Over p Accident Year p Preliminary Source: NCCI Unit Statistical Plan data Frequency is lost time claims at 1st report per $1M premium at current wage and NCCI pure loss cost level Prior to assigning individual claims to size of loss categories, reported loss amounts are adjusted for inflation through 2014 For all states where NCCI provides ratemaking services 46

47 Frequency Countrywide Lost-Time Claim Frequency by Part of Body Groupings Accident Year p Cumulative changes 2008 to 2014: +21% -1% -17% +2% -9% -10% -14% -18% -18% -6% -10% -10% -7% -4% -11% for all Lost-Time Claims p Preliminary Source: NCCI Unit Statistical Plan data Frequency is lost time claims at 1st report per $1M premium at current wage and NCCI pure loss cost level For all states where NCCI provides ratemaking services 47

48 Connecticut Lost-Time Claim Frequency Percent Change 5% -4% -2% -3% -1% -3% -1% 0% -3% -3% -6% -7% -7% -12% Policy Year Source: NCCI Financial Data Frequency is lost time claims per $1M premium at current wage and approved pure loss cost level 48

49 Frequency per Million of On-Leveled Premium Connecticut Lost-Time Claim Frequency Cumulative Change of -39.6% ( ) Policy Year Source: NCCI Financial Data Frequency is lost time claims per $1M premium at current wage and approved pure loss cost level 49

50 Connecticut vs. Region Claim Frequency per 100,000 Workers All Claims Reg 1,068 3,307 Total 4,375 VT 1,059 3,247 Total 4,306 RI 1,470 2,415 Total 3,885 NH 901 2,942 Total 3,843 ME 926 4,526 Total 5,452 CT 1,264 2,621 Total 3,885 Lost Time Medical Only Based on NCCI s Statistical Plan data 50

51 Indemnity Claim Severity

52 Countrywide Average Indemnity Claim Severity Severity ($ Thousands) 25 Private Carriers and State Funds +9.3% +0.6% +2.9% +1.5% +1.0% -2.2% +0.9% -0.1% $ % +9.0% +5.9% +7.7% $10.4 $11.2 $12.2 $ % $ % +9.2% +3.1% +4.6% +3.1% +1.0% $16.2 $16.7 $17.5 $17.6 $ p 15p $ % $20.5 $22.4 $22.6 $22.1 $22.2 $22.2 $22.9 $23.2 $23.5 Accident Year p Preliminary based on data valued as of 12/31/2015 Source: NCCI s Financial Call data, developed to ultimate; excludes high-deductible policies; : based on data through 12/31/2014 Includes all states where NCCI provides ratemaking services; WV is included in 2014 and subsequent 52

53 25 Countrywide Workers Compensation Average Indemnity Cost per Lost-Time Claim Severity ($ Thousands) Private Carriers and State Funds NCCI States Cumulative Change in Excess of Wage Growth ( p): +23% Cumulative Change ( p): +138% p 15p Accident Year p Preliminary based on data valued as of 12/31/2015 Sources: Severity: NCCI s Financial Call data, developed to ultimate, excludes high-deductible policies; : based on data through 12/31/2014 US Average Weekly Wage: and , Quarterly Census of Employment and Wages; , NCCI; 2015p, NCCI and Moody s Economy.com Includes all states where NCCI provides ratemaking services; WV is included in 2014 and subsequent 53

54 Countrywide Relative Growth Rates Indemnity Severity vs. Wage Inflation Private Carriers and State Funds NCCI States Cumulative Change in Indemnity Claim Severity Cumulative Change in US Average Weekly Wage (AWW) 1995 to to to 2015p Severity Growth > US AWW Growth Severity Growth > US AWW Growth US AWW Growth > Severity Growth p Preliminary based on data valued as of 12/31/2015 Sources: Severity: NCCI s Financial Call data, developed to ultimate, excludes high-deductible policies; : based on data through 12/31/2014 US Average Weekly Wage: and , Quarterly Census of Employment and Wages; , NCCI; 2015p, NCCI and Moody s Economy.com Includes all states where NCCI provides ratemaking services; WV is included in 2014 and subsequent 54

55 Average Indemnity Claim Severity ($ '000s) Connecticut Average Indemnity Claim Severity Policy Year Adjusted to Current Wage Level Actual Based on NCCI s financial data for lost-time claims at current benefit level and developed to ultimate 55

56 Connecticut Average Indemnity Claim Severity Lost-Time Claim Severity in $ Thousands Cumulative Change of +55.5% ( ) 14.4% -2.6% 9.8% 5.9% -7.0% 5.2% 3.2% 1.6% 0.8% -1.7% 1.8% 1.8% 9.6% 3.8% $30.9 $31.5 $31.2 $30.7 $29.7 $28.3 $30.4 $28.7 $26.1 $26.8 $23.4 $22.6 $20.6 $20.2 $ Policy Year Based on data through 12/31/2015, on-leveled and developed to ultimate 56

57 Regional Comparison Average Indemnity Claim Severity Lost-Time Claim Severity in $ Thousands $30.9 $28.1 $28.2 $17.7 $21.1 CT NH ME RI VT Based on NCCI s financial data for lost-time claims 57

58 Cost per Case ($ '000s) Connecticut vs. Countrywide Average Indemnity Claim Severity Lost-Time Claim Severity in $ Thousands p 2015p Accident Year Connecticut Countrywide p Preliminary based on data valued as of 12/31/2015 Source: NCCI s financial data 58

59 Connecticut Indemnity Loss Distribution by Injury Type Connecticut 3% 24% 71% 2% Region 0% 42% 56% 2% Countrywide 31% 60% 4% 5% 0% 20% 40% 60% 80% 100% Temporary Total Permanent Partial Permanent Total Fatal Regional states are ME, NH, RI, and VT Based on NCCI s Statistical Plan data for jurisdictions/claim type combinations for which three or more cases exist 59

60 Medical Claim Severity

61 Medical Benefits Constitute Nearly Half of Total Benefit Costs in Connecticut Connecticut Indemnity 51% Medical 49% Region Indemnity 49% Medical 51% Countrywide Indemnity 41% Medical 59% 0% 20% 40% 60% 80% 100% Regional states are ME, NH, RI, and VT Based on NCCI financial data 61

62 Countrywide Average Medical Claim Severity Severity ($ Thousands) Private Carriers and State Funds $ % $ % +7.3% +8.3% +10.1% $10.8 $11.6 $12.9 $ % +3.0% +4.5% +0.4% % -1.0% +7.0% +5.9% +7.8% +5.8% +7.7% +5.4% +8.8% +13.5% $15.7 $17.1 $18.4 $19.4 $ p 15p $22.1 Accident Year $23.4 $25.0 $26.2 $26.3 $26.8 $27.3 $28.0 $28.8 $28.5 p Preliminary based on data valued as of 12/31/2015 Source: NCCI S Financial Call data, developed to ultimate, excludes high-deductible policies; : based on data through 12/31/2014 Includes all states where NCCI provides ratemaking services; WV is included in 2014 and subsequent 62

63 Severity ($ Thousands) Countrywide Workers Compensation Average Medical Cost per Lost-Time Claim Private Carriers and State Funds NCCI States 35 Cumulative Change in Excess of Medical Care Inflation ( p): +55% Cumulative Change ( p): +214% p 15p Accident Year p Preliminary based on data valued as of 12/31/2015 Sources: Severity: NCCI s Financial Call data, developed to ultimate, excludes high-deductible policies; : based on data through 12/31/2014 US Medical CPI: US Bureau of Labor Statistics Includes all states where NCCI provides ratemaking services; WV is included in 2014 and subsequent 63

64 Countrywide Relative Growth Rates Medical Severity vs. Medical Care Inflation Private Carriers and State Funds NCCI States Cumulative Change in Lost-Time Medical Claim Severity Cumulative Change in US Medical Consumer Price Index (CPI) 1995 to to to2015p Severity Growth > US MCPI Growth Severity Growth > US MCPI Growth US MCPI Growth > Severity Growth p Preliminary based on data valued as of 12/31/2015 Sources: Severity: NCCI s Financial Call data, developed to ultimate; excludes high-deductible policies; : based on data through 12/31/2014 US Medical CPI: US Bureau of Labor Statistics Includes all states where NCCI provides ratemaking services; WV is included in 2014 and subsequent 64

65 Average Medical Claim Severity ($ '000s) Connecticut Average Medical Claim Severity Lost-Time Claim Severity in $ Thousands Policy Year Adjusted to Current Wage Level Actual Based on NCCI s financial data for lost-time claims at current benefit level and developed to ultimate 65

66 Connecticut Average Medical Claim Severity Lost-Time Claim Severity in $ Thousands Cumulative Change of % ( ) 19.1% -5.7% 6.0% 2.1% 2.5% 8.2% 2.9% -3.8% 14.1% 0.7% 13.8% $ % 15.5% -0.9% $16.5 $14.6 $14.7 $18.8 $21.4 $21.6 $25.7 $24.2 $25.7 $26.2 $26.9 $29.1 $29.9 $ Policy Year Based on data through 12/31/2015, on-leveled and developed to ultimate 66

67 Regional Comparison Average Medical Claim Severity Lost-Time Claim Severity in $ Thousands $28.8 $35.5 $25.4 $30.3 $10.6 CT NH ME RI VT Based on NCCI s financial data for lost-time claims 67

68 Cost per Case ($ '000s) Connecticut vs. Countrywide Average Medical Claim Severity Lost-Time Claim Severity in $ Thousands p 2015p Accident Year Connecticut Countrywide p Preliminary based on data valued as of 12/31/2015 Source: NCCI s financial data 68

69 Connecticut Medical Loss Distribution by Injury Type Connecticut 24% 58% 8% 10% 0% Region 0% 38% 45% 17% 0% Countrywide 29% 48% 9% 13% 1% 0% 20% 40% 60% 80% 100% Temporary Total Permanent Partial Permanent Total Medical Only Fatal Regional states are ME, NH, RI, and VT Based on NCCI s Statistical Plan data for jurisdictions/claim type combinations for which three or more cases exist 69

70 Guest Speaker: Tim Hassett-Salley WCRI

71 Legislative Issues: Federal, Countrywide, and Connecticut

72 TRIPRA Data Reporting Federal Insurance Office Federal Insurance Office guidance on TRIPRA of 2015 Section 111 data reporting requirements were released in early March For 2016, carrier reporting of data to FIO is voluntary. NCCI continues to work with FIO and industry to assist in Section 111 data reporting Carriers participating in the 2016 data call were asked to submit terrorism data through newly created portal ( by April 30,

73 Emerging Issues Occupational Safety and Health Administration (OSHA) Draft safety and health program guidelines Workplace safety initiatives Social Security Disability Insurance Reform (SSDI) SSDI Solutions Initiative recommendations Further congressional action Medicare Set-Aside Reform Congressional Budget Office (CBO) scoring 73

74 2016 Legislative Sessions CA OR WA NV ID AZ UT MT WY CO NM ND SD NE KS OK MN WI IA IL MO AR MI IN OH KY TN ME VT NH NY MA CT PA NJ DE WV VA MD DC NC SC RI MS AL GA AK TX LA HI FL States With 2015/2016 Carryover States With 2016/2017 Biennium States With No Carryover States With No Regular Session in 2016 Copyright 2016 NCCI Holdings, Inc. All Rights Reserved. 74

75 Top 5 Workers Compensation-Related Legislation Topics in 2016 First Responder Presumption Employer/Employee Definition Medical Cost Management Independent Contractors and Misclassification Exclusive Remedy 75

76 Connecticut Enacted Legislation SB An Act Concerning Workers Compensation Insurance and Sole Proprietors HB An Act Concerning the Filing of Workers Compensation Claims When a Municipality is the Employer HB An Act Establishing a Firefighters Cancer Relief Program 76

77 Key Judicial Decisions in 2016 Castellanos v. Next Door Company The Florida Supreme court declared that the mandatory attorney fee schedule in workers compensation cases is a violation of due process and is therefore unconstitutional. Westphal v. City of St. Petersburg The Florida Supreme Court concluded that the 104 week limitation on temporary total disability benefits results in a statutory gap in benefits and is therefore unconstitutional. The decision restores the 260 week limitation that preceded the 1994 amendments to the statutes. Maxwell v. Sprint, PCS The Oklahoma Supreme Court declared as unconstitutional a provision of the state's workers compensation act that defers benefits for injured employees who return to work. 77

78 Key Connecticut Judicial Decisions in 2016 Gonzalez v O&G Industries The Connecticut Supreme Court upheld summary judgment in favor of O&G, the general contractor, on the ground it was immune to liability as the principal employer because they paid compensation benefits to the subcontractor employees under the governing CCIP. Velecela v All Habitat Services, LLC The Connecticut Supreme Court upheld summary judgment that the surviving spouse s lawsuit for emotional distress was properly barred by the exclusive remedy provision of the CT WC Act. 78

79 Key Takeaways Legislative activity for 2016 is about average for an election year No significant workers compensation measures have progressed The financial impact of legislation, regulations, and judicial decisions priced in 2016 on states WC systems ranged from 3.7% to +19.6% 79

80 Connecticut Residual Market

81 Residual Market Video Excerpt Jim Nau, General Manager NCCI Residual Markets

82 Where Does NCCI Provide Residual Market Services? 82

83 83

84 Connecticut Residual Market Share Plan Premium as a Percentage of Direct Written Premium 7% 6% 6.5% 6.6% 6.1% 5% 5.1% 4% 3.8% 3% 2% 1% 0% * Calendar Year * Preliminary 84

85 18,000 Connecticut Total Residual Market Plan Policy Counts as of 12/31/15 16,000 14,000 12,000 15,275 14,347 13,094 11,102 10,579 10,691 11,102 12,355 13,472 14,367 10,000 8,000 6,000 4,000 2, Policy Year 85

86 Connecticut Total Residual Market Plan Estimated Premium $ Millions As of 12/31/15 $60 $56.2 $54.8 $50 $46.1 $48.6 $40 $30 $39.8 $31.4 $26.8 $23.9 $24.7 $36.4 $20 $10 $ Policy Year 86

87 Connecticut Residual Market Distribution of Policies and Estimated Premium By Size of Risk for Policy Year 2015 as of 12/31/15 Size of Risk Policy Count % of Policies Total Premium % of Premium Average Policy Size $0- $2,499 11, % $11,730, % $1,011 $2,500- $4,999 1, % $3,899, % $3,503 $5,000- $9, % $5,609, % $6,959 $10,000- $19, % $6,072, % $13,958 $20,000- $49, % $7,783, % $30,763 $50,000- $99, % $6,505, % $67,769 $100,000- $199, % $6,782, % $135,659 $200, % $6,458, % $322,939 Total 14, % $54,842, % $3,817 87

88 Closing Remarks Thank You!

89 Glossary

90 Glossary Assigned Risk Adjustment Program (ARAP) An assigned risk market program that surcharges residual market risks based on the magnitude of their experience rating modification. Calendar Year (CY) Experience of earned premium and loss transactions occurring within the calendar year beginning January 1, irrespective of the contractual dates of the policies to which the transactions relate and the dates of the accidents. Calendar-Accident Year (AY) The accumulation of loss data on all accidents with the date of occurrence falling within a given calendar year. The premium figure is the same as that used in calendar year experience. Claim Frequency The number of claims per unit of exposure; for example, the number of claims per million dollars of premium or per 100 workers. 90

91 Glossary Claim Severity The average cost of a claim. Severity is calculated by dividing total losses by the total number of claims. Combined Ratio The sum of the (1) loss ratio, (2) expense ratio, and (3) dividend ratio for a given time period. Detailed Claim Information (DCI) An NCCI Call that collects detailed information on an individual workers compensation lost-time claim basis, such as type of injury, whether or not an attorney was involved, timing of the claim s report to the carrier, etc. Direct Written Premium (DWP) The gross premium income adjusted for additional or return premiums, but excluding any reinsurance premiums. 91

92 Glossary Indemnity Benefits Payments by an insurance company to cover an injured worker s time lost from work. These benefits are also referred to as wage replacement benefits. Loss Ratio The ratio of losses to premium for a given time period. Lost-Time (LT) Claims Claims resulting in indemnity benefits (and usually medical benefits) being paid to or on behalf of the injured worker for time lost from work. Medical-Only Claims Claims resulting in only medical benefits being paid on behalf of an injured worker. Net Written Premium (NWP) The gross premium income adjusted for additional or return premiums and including any additions for reinsurance assumed and any deductions for reinsurance ceded. 92

93 Glossary Permanent Partial (PP) A disability that is permanent but does not involve a total inability to work. The specific definition and associated workers compensation benefits are defined by statute and vary by jurisdiction. Policy Year (PY) The year of the effective date of the policy. Policy year financial results summarize experience for all policies with effective dates in a given calendar year period. Schedule Rating A debit and credit plan that recognizes variations in the hazard-causing features of an individual risk. Take-Out Credit Program An assigned risk program that encourages carriers to write current residual market risks in the competitive voluntary marketplace. Temporary Total (TT) A disability that totally disables a worker for a temporary period of time. 93

94 Appendix

95 NCCI s Workers Compensation Resources Financial Aggregate Calls Used for aggregate ratemaking Statistical Plan for Workers Compensation and Employers Liability Insurance (Statistical Plan) Used for class ratemaking Detailed Claim Information In-depth sample of lost-time claims Policy Data Policy declaration page information 95

96 Financial Aggregate Calls Collected Annually Policy and calendar-accident year basis Statewide and assigned risk data Premiums, Losses, and Claim Counts Evaluated as of December 31 Purpose Basis for overall aggregate rate indication Research 96

97 Policy Year Financial Aggregate Data Policy Expiration Date Policy Year 2012 Policy Year 2013 Policy Year /1/2012 1/1/ /31/2013 1/1/ /31/2016 Policy Effective Date 97

98 Calendar-Accident Year Financial Aggregate Data Policy Expiration Date Calendar- Accident Year 2013 Calendar- Accident Year 2014 Calendar- Accident Year /1/2013 1/1/ /31/2014 1/1/ /31/2017 Policy Effective Date 98

99 Statistical Plan for Workers Compensation and Employers Liability Insurance (Statistical Plan) Data Experience by Policy Detail Exposure, premium, and experience rating modifications Individual claims by injury type Purposes Classification relativities Experience Rating Plan Research 99

100 Valuation of Statistical Plan Data 1st Report Valuation 2nd Report Valuation 3rd Report Valuation 4th Report Valuation 5th Report Valuation Policy Effective 18 Months 30 Months 42 Months 54 Months 66 Months 100