Illinois. August 31,

Transcription

1 Illinois August 31,

2 Illinois State Advisory Forum Annual Issues Symposium (AIS): Bill Donnell Video Excerpt Countrywide Workers Compensation System Illinois Workers Compensation System and Filing Activity Countrywide and Illinois Labor Markets Legislative Issues: Countrywide and Illinois Emerging Issue: 2017 Medical Marijuana Update Residual Market: Countrywide and Illinois Q & A 2

3 AIS State of the Line Video Excerpt Bill Donnell NCCI President and CEO

4 Countrywide Workers Compensation System

5 Countrywide Workers Compensation (WC) System An Overview After five years of growth, premium is flat in the most recent year The combined ratio continues to show favorable results Frequency declined again at the latest point Medical and indemnity severity are increasing modestly 5

6 $ Billions WC Net Written Premium Private Carriers and State Funds State Funds ($B) Private Carriers ($B) p Calendar Year p Preliminary Source: NAIC s 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 6

7 WC Direct Written Premium Change by Component Private Carriers NCCI States Change in Direct Written Premium: 0.0% Payroll 2016 vs % Loss Cost and Mix -2.7% Carrier Discounting -1.4% State Fund Conversion to Private Carrier +1.0% Other Factors -0.8% Sources: DWP Change: NAIC s Annual Statement Statutory Page 14 for all states where NCCI provides ratemaking services Components: NCCI s Policy data 7

8 Increases in Payroll Continue to Drive Premium Growth Forecast Change Payroll Wage Rate +4.5% Employment +2.5% +1.9% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% -1% Prof. & Business Services Trade, Transport., & Utilities Education & Health Services Financial Activities Construction Manufacturing Construction Leisure & All Other Hospitality -1% Prof. & Business Services Trade, Transport., & Utilities Education & Health Services Financial Activities Manufacturing Leisure & All Other Hospitality Sources: Moody s Analytics and NCCI 8

9 Percent 5 WC Approved Changes in Bureau Premium Level By Effective Year for NCCI States p Calendar Year p Preliminary Source: NAIC s Annual Statement Statutory Page 14 Bureau premium level changes reflect approved changes in advisory rates, loss costs, assigned risk rates, and rating values, as of 5/12/2017, relative to those previously approved in NCCI states only IN and NC are filed in cooperation with state rating bureaus 9

10 Percent WC Combined Ratio Underwriting Gain Achieved Private Carriers 3% lower p Calendar Year p Preliminary Source: NAIC s Annual Statement data 10

11 WC Combined Ratio Components Private Carriers Percent Dividends 1 1 Underwriting Expense Ratio Loss Adjustment Expense (LAE) Ratio Loss Ratio p Calendar Year p Preliminary Source: NAIC s Annual Statement data 11

12 WC Net Combined Ratios Calendar Year vs. Accident Year As Reported Private Carriers Percent 120 Calendar Year Accident Year p p Preliminary Source: NAIC s Annual Statement data Accident Year information is reported as of 12/31/2016 Includes dividends to policyholders 12

13 WC Lost-Time Claim Frequency Change in Lost-Time Claims per $1M Pure Premium Percent 5 Private Carriers and State Funds NCCI States 0-5 Average Annual Change: 3.6% ( ) p Accident Year 2010 and 2011 adjusted primarily for significant changes in audit activity p Preliminary based on data valued as of 12/31/2016 Source: NCCI s Financial Call data, developed to ultimate, premium adjusted to current wage and voluntary pure premium level, excludes high-deductible policies; based on data through 12/31/2015 Values displayed reflect the methodology underlying the most recent rate/loss cost filing Includes all states where NCCI provides ratemaking services; WV is excluded through

14 Severity ($ Thousands) WC Average Indemnity Claim Severity Private Carriers and State Funds NCCI States % +3% $23.2 $ p Accident Year p Preliminary based on data valued as of 12/31/2016 Source: NCCI s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015 Values displayed reflect the methodology underlying the most recent rate/loss cost filing Includes all states where NCCI provides ratemaking services; WV is excluded through

15 Relative Growth Rates Indemnity Severity vs. Wage Inflation Private Carriers and State Funds NCCI States +65% +33% Change in Indemnity Severity in Excess of Wage Inflation +34% +9% Change in Overall Indemnity Severity +32% Change in Wage Inflation +25% +7% +19% 1995 to to to 2016p -12% p Preliminary based on data valued as of 12/31/2016 Sources: Severity: NCCI s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015 Values displayed reflect the methodology underlying the most recent rate/loss cost filing Includes all states where NCCI provides ratemaking services; WV is excluded through 2007 US Average Weekly Wage: and , Quarterly Census of Employment and Wages; , NCCI; 2016p, NCCI and Moody s Analytics 15

16 WC Average Medical Lost-Time Claim Severity Private Carriers and State Funds NCCI States Severity ($ Thousands) % +5% $27.7 $ p Accident Year p Preliminary based on data valued as of 12/31/2016 Source: NCCI s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015 Values displayed reflect the methodology underlying the most recent rate/loss cost filing Includes all states where NCCI provides ratemaking services; WV is excluded through

17 Changes in Medical Lost-Time Claim Severity by Component Private Carriers and State Funds NCCI States +72% +56% Change in the Medical Utilization Component +47% +27% Change in Overall Medical Severity +16% Change in the Medical Price Component 1995 to to to 2016p +20% +14% +2% +12% p Preliminary based on data valued as of 12/31/2016 Sources: Severity: NCCI s Financial Call data, developed to ultimate, excludes high-deductible policies; based on data through 12/31/2015 Values displayed reflect the methodology underlying the most recent rate/loss cost filing Includes all states where NCCI provides ratemaking services; WV is excluded through 2007 Centers for Medicare & Medicaid Services: Personal Health Care Chain-Weighted Price Index 17

18 Illinois Workers Compensation System

19 Illinois Workers Compensation System An Overview Premium volume was down in 2016 Underwriting gains were indicated in each of the last five years Lost-time claim frequency declined more than 10% from 2013 to 2015 Average indemnity and medical claim costs increased in the latest year 19

20 Illinois Workers Compensation Premium Volume Direct Written Premium in $ Millions 2,707 2,591 2,349 2,254 2,418 2,601 2,685 2,754 2,827 2, p Calendar Year p Preliminary Source: NAIC s Annual Statement data 20

21 Illinois Accident Year Combined Ratios by Component 97% 91% 88% 85% 86% 0% 0% 0% 0% 0% 35% 35% 34% 33% 34% 62% 56% 54% 52% 52% Loss Ratio Expense Ratio Dividend Ratio Accident Year Sources: NCCI s financial data and NAIC s Annual Statement data 21

22 Illinois WC Lost-Time Claim Frequency Percent Change in Lost-Time Claims 1.0% 0.5% 2.8% Cumulative Change of 31.5% ( ) -1.7% -1.5% -0.1% -0.6% -0.9% -4.5% -5.4% -5.7% -4.6% -8.1% -7.8% Policy Year Based on data through 12/31/2016, developed to ultimate 22

23 Illinois Average Indemnity Claim Severity Lost-Time Claim Severity in $ Thousands Cumulative Change of +49.9% ( ) 12.5% 9.4% 2.5% 3.7% 11.8% 0.7% 10.2% -4.6% -4.0% -0.8% -4.0% 0.8% 0.5% 4.4% $34.3 $32.8 $32.6 $32.3 $33.7 $34.0 $35.4 $37.1 $33.7 $33.4 $29.9 $28.8 $28.1 $25.7 $ Policy Year Based on data through 12/31/2016, on-leveled and developed to ultimate 23

24 Illinois Average Medical Claim Severity Lost-Time Claim Severity in $ Thousands 21.0% Cumulative Change of +85.4% ( ) 12.5% 9.8% 5.6% 10.5% 1.3% 6.7% -1.0% -5.7% 0.8% 4.2% -1.0% -1.4% 2.6% $30.3 $29.5 $29.9 $30.2 $29.0 $28.8 $30.5 $30.8 $28.9 $28.5 $25.8 $24.4 $22.2 $19.8 $ Policy Year Based on data through 12/31/2016, on-leveled and developed to ultimate 24

25 Illinois Filing Activity Voluntary, Loss Cost, and Assigned Risk Rate Changes -1.2% No Filing -5.8% -4.5% -6.2% -5.5% -5.5% -6.7% -7.5% -11.4% -10.9% -13.4% -12.9% 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018* Voluntary Loss Costs Voluntary Rates Assigned Risk *Pending 25

26 Illinois January 1, 2018 Voluntary Filing Overall Loss Cost Level Change: 11.4% Change in Experience: 7.5% Change in Trend: 4.3% Change in Benefits: +0.3% Offset for Minimum Premium Changes: 0.2% Overall Rate Level Change: 10.9% Change in Overall Loss Cost Level: 11.4% Change in Expenses: +0.5% 26

27 Illinois January 1, 2018 Assigned Risk Filing Overall Assigned Risk Level Change: 7.5% Change in Overall Voluntary Rate Level: 10.9% Change in Assigned Risk Differential: +3.3% Change in Uncollectible Premium Provision: +0.5% 27

28 Illinois January 1, 2018 Filing Average Changes by Industry Group Overall Rate Change: 10.9% Manufacturing: 10.7% Contracting: 12.1% Office & Clerical: 15.2% Goods & Services: 9.7% Miscellaneous: 9.7% 28

29 Cumulative Rate/Loss Cost Level Change (%) 5 Illinois Cumulative Voluntary Rate/ Loss Cost Level Changes No Filing *Law only **Pending 1/11 9/11* 1/12 1/13 1/14 1/15 1/16 1/17 1/18** Effective Date Loss Cost Rate 29

30 Percent Current NCCI Voluntary Market Loss Cost/Rate Level Changes Excludes Law-Only Filings NC OR NH MD TN CO AL CT IL NV WVOK LA IN NM UT IA AR KS VT MT TX AZ MS FL KY RI ME NE MO DC AK ID SD GA VA HI SC 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

31 Current Voluntary Market Rates/Loss Costs States in Proximity to Illinois Missouri^ 1/1/17 3.7% Kentucky^ 10/1/17 4.6% Kansas^ 1/1/17 8.4% Wisconsin 10/1/ % Iowa* 1/1/18 8.7% Indiana 1/1/17 9.3% Michigan^ 1/1/17 9.3% Illinois* 1/1/ % Minnesota^ 1/1/ % *Pending ^Loss Cost Level Change 31

32 Current Average Voluntary Pure Loss Costs Using Illinois Payroll Distribution Pure Loss Cost All Classes IL IN IA MO Region Country Based on the latest NCCI approved rates and loss costs in the various states 32

33 A Cautionary Tale: The Danger of Comparing Average Loss Costs Across States

34 Countrywide and Illinois Labor Markets

35 National Economic Highlights and Their Impact on Workers Compensation National Economic Indicator Private employment growth is expected to continue to slow Potential Impact on the Workers Compensation Market The impact on payroll and premium will also slow Wage growth is poised to accelerate Upward pressure on payroll and premium as well as indemnity severity Medical inflation is forecast to slow and then reaccelerate Interest rates are still low, but expected to increase Increases in medical costs per claim Investment income will likely remain muted this year, but increase as interest rates rise 35

36 Change in Private Employment Private Employment Growth Is Below Average Percent 3 May 2015 May 2016 May Illinois United States Private Nonfarm Employment, seasonally adjusted Frequency of observation: monthly; latest available data point: May 2017; percentage change for the 12 months ending each May Source: US Bureau of Labor Statistics (BLS), 36

37 Change in Employment by Industry Employment in Most Industries Has Increased in the Past 12 Months Industrial Sector 12-Month Percent Change, May 2017 Sector Size % Share 12-Month Change Education and Health Services Professional and Business Services Financial Activities Leisure and Hospitality Information Natural Resources and Mining Other Services Government Construction Manufacturing Trade, Transportation, and Utilities IL , ,200 US +2.3 IL , ,400 US +3.1 IL , ,500 US +2.0 IL , ,400 US +2.1 IL , ,600 US 0.6 IL , US +4.7 IL , US +1.4 IL , ,400 US +0.5 IL , ,700 US +2.9 IL , ,800 US +0.5 IL 0.6 1,201, ,700 US +0.6 Percentage change for the latest 12 months as of May 2017 Current Employment Statistics Survey, seasonally adjusted; frequency of observation: monthly Source: US Bureau of Labor Statistics (BLS), 37

38 Change in Average Weekly Wages Wage Growth Is Below the Rest of the Nation Percent Illinois United States Wages are for Total Private Industry Frequency of observation: annual; latest available data point: 2016; values for 2016 are preliminary Source: US Bureau of Labor Statistics (BLS), 38

39 Percent Headline Unemployment Rate The Unemployment Rate Is Above Average May 2015 May 2016 May Illinois United States Headline Unemployment Rate, seasonally adjusted Frequency of observation: monthly; latest available data point: May 2017 Source: US Bureau of Labor Statistics (BLS), 39

40 Illinois Labor Market The unemployment rate in Illinois is above the US rate Employment growth is below the US rate: The Education and Health Services sector has added the most jobs Professional and Business Services is the second largest sector in the state and was behind Education and Health Services in terms of the number of jobs added The Trade, Transportation, and Utilities; Manufacturing; Construction; Government; and Other Services sectors have experienced declines Illinois wage growth is below the US average 40

41 Legislative Issues: Countrywide and Illinois 41

42 2017 Overview Countrywide, legislative activity has increased over prior years both in volume and content. Regulation changes thus far concern medical cost management, claim handling, and effectuating enacted legislation. Year to date, there have been fewer workers compensationrelated cases at the state supreme court level than there were in The 2016 general election resulted in a net gain for Republicans in state government, where they now control both chambers of the legislature and the governor s office in 26 states. 42

43 2017 Workers Compensation Legislative Activity CA OR WA NV ID UT MT WY CO ND SD NE KS MN WI IA MO IL MI IN OH KY WV PA VA NY VT NH CT ME MA DC NJ DE MD RI AZ NM OK AR TN SC NC MS AL GA AK TX LA FL HI 0 10 Bills Introduced Bills Introduced Bills Introduced More Than 30 Bills Introduced As of July 1,

44 Key Workers Compensation-Related Themes in Introduced Legislation First Responder Presumptions Indemnity Benefits Medical Cost Management Definitions 44

45 Federal Focus on State-Based Workers Compensation System Increased interest in state insurance regulation: Nexus between workers compensation program and federal benefit programs a. Centers for Medicare & Medicaid Services b. Social Security Disability Insurance Bipartisan Policy Center report Improving U.S. Insurance Regulation calls for considering minimal federal insurance standards for property/casualty (including workers compensation and life insurance lines). CHOICE Act (H.R. 10) would recast the federal focus on insurance issues by repealing the Federal Insurance Office and creating the Office of the Independent Insurance Advocate an advocate for US policyholders and a voting member of the Financial Stability Oversight Council. 45

46 Federal Emerging Issues Regulation of Air Ambulance Services Sen. Jon Tester (MT) introduced legislation to provide state authority Federal Aviation Administration Reauthorization Social Security Disability Insurance (SSDI) Reform SSDI Solutions Initiative recommendations SSDI State Department of Labor Audit Pilot Medicare Set- Aside (MSA) Reform Legislation to be introduced to bring greater efficiency to MSA Process Congressional Budget Office (CBO) scoring 46

47 Illinois Legislative Environment NCCI tracked 32 bills in the 2017 Illinois legislative session Only 3 bills passed both houses but 2018 is a carryover session HB 1954 to the Governor Includes provisions related to the notification of cancellation and notification of nonrenewal of a policy of insurance Extends confidential treatment to all working papers, recorded information, documents, and copies produced by, obtained by, or disclosed to the Director of Insurance in the course of market conduct examinations 47

48 Illinois Legislative Environment HB 2525 to the Governor Establishes a prior approval requirement when a carrier seeks to deviate from the advisory rates filed by a licensed rating organization Defines a rate as excessive if it is likely to produce a long-run profit that is unreasonably high for the insurance provided or if expenses are unreasonably high in relation to the services rendered Creates a mechanism whereby an insured may file a request for review of a premium from the Director of Insurance Clarifies compensability for traveling employees Provides for certification of employer workers compensation safety programs or return-to-work programs, and requires recalculation of premium Allows right of contribution for repetitive or cumulative trauma injuries Requires creation of an evidence-based prescription drug formulary Implements a new report on the self-insurance market Establishes the Workers Compensation Premium Rates Task Force 48

49 Illinois Legislative Environment HB 2622 to the Governor Establishes the Illinois Employers Mutual Insurance Company as a nonprofit, independent public corporation to insure Illinois employers against liability for workers compensation and occupational disease coverage A loan of $10,000,000 from the Illinois Workers Compensation Commission Operations Fund will provide the initial capitalization 49

50 EMERGING ISSUE: The Legalization of Marijuana and Its Impact on Workers Compensation

51 State Activity Medical Marijuana Recreational Marijuana 29 8 Plus Washington, DC have legalized medical marijuana Plus Washington, DC have legalized recreational marijuana 51

52 Federal Activity US Drug Enforcement Administration Federal funds will not be used to prevent state implementation of medical marijuana laws Controlled Substances Act Unclear as to what will happen August 2016 May 2017 Currently 2017 and Beyond Will not reclassify marijuana House Resolution 244 Marijuana is an illegal Schedule I drug Current Administration 52

53 Colorado Supreme Court Coats v. Dish Network (2015) Employers can lawfully terminate workers for using marijuana outside of work hours even though the drug is LEGAL in the state. 53

54 An insurer MUST reimburse a qualified workers comp claimant for the cost of medical marijuana to treat low back pain Appealed to NM New Mexico Court of Appeals Vialpando v. Ben s Automotive Services and Redwood Fire & Casualty (2014) Supreme Court: Certiorari denied 54

55 New Mexico Court of Appeals Maez v. Riley Industrial (2015); Lewis v. American General Media (2015) An employer is required to reimburse a qualified claimant for medical marijuana if the drug is reasonable and necessary medical care for treatment of a work injury. 55

56 Connecticut Workers Compensation Commission Decision Petrini v. Marcus Dairy, Inc. and Gallagher Bassett Service (2016) Upheld the decision that the claimant s use of medical marijuana for pain management of his debilitating condition constitutes reasonable and necessary medical treatment. Appealed to Connecticut Court of Appeals 56

57 Maine WC Board Decisions (2016) Maine WC Board: Noll v. Lepage Bakeries, Inc. and Cannon Cochran Management Services Bourgoin v. Twin Rivers Paper Co., LLC and Sedgwick CMS Self-insured employer is to reimburse costs for reasonable and proper use of medical marijuana under state s WC and medical marijuana law. Appealed to Maine Supreme Judicial Court: Certiorari denied in Noll; granted in Bourgoin 57

58 Other Activity At least five states (Connecticut, Maine, Minnesota, New Jersey, and New Mexico) have allowed reimbursement for WC under certain circumstances Florida and North Dakota passed legislation in 2017 prohibiting payment of WC benefits for medical marijuana New Mexico Adopted a fee schedule to provide for reimbursement of medical marijuana to injured workers effective January 1, 2016 Introduced legislation (SB 371/HB 527) in 2017 requiring employers and carriers to pay for medical marijuana for injured workers; the legislation did not pass 58

59 Questions Raised by WC Stakeholders Is marijuana a safer alternative to opioids for pain management? Is it a less expensive alternative to other drugs? When a state legalizes marijuana, what is the potential impact on neighboring states? Should states consider fee schedules for marijuana (like New Mexico)? How are appropriate dosage levels determined? What is the impact on Medicare Set-Aside Allocations since marijuana is still illegal under federal law? 59

60 Legalization of Marijuana Summary States are increasingly legalizing marijuana in some form for medical use. Courts are increasingly dealing with contested cases of medical marijuana in the work environment. Marijuana is still illegal under federal law and remains a Schedule I drug. 60

61 Residual Market: Countrywide and Illinois

62 Where Does NCCI Provide Residual Market Services? As of January 2017, NCCI provides Plan Administration services in the following states: AK, AL, AR, AZ, CT, DC, GA, IA, ID, IL, KS, MS, NH, NM, NV, OR, SC, SD, TN, VA, VT, and WV Other Plan services: DE, IN, and NC As of January 2017, NCCI provides Pool Administration services in the following states: National Pool: AK, AL, AR, AZ, CT, DC, DE, GA, IA, ID, IL, KS, NC, NH, NJ, NV, OR, SC, SD, TN, VA, VT, and WV New Mexico Pool Tennessee Reinsurance Mechanism Financial and Actuarial Services: MA and MI 62

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

64 Illinois Total Residual Market Plan Policy Counts As of 12/31/ ,389 26,343 23,436 22,335 21,556 23,872 27,344 30,908 33,414 34, Policy Year 64

65 Illinois Total Residual Market Plan Estimated Premium Volume Premium in $ Millions as of 12/31/ Policy Year 65

66 Illinois Residual Market Share Plan Premium as a Percentage of Direct Written Premium 4.3% 5.3% 5.1% 4.6% 4.3% * Calendar Year *Preliminary 66

67 Illinois Average Size Accounts for Residual Market Policies and Estimated Premium As of 12/31/2016 Premium Range Policy Count % of Policies Total Premium % of Premium Average Policy Size $0 $2,499 28, % $23,757, % $824 $2,500 $4,999 2, % $8,481, % $3,559 $5,000 $9,999 1, % $10,858, % $7,046 $10,000 $19, % $12,098, % $13,874 $20,000 $49, % $16,480, % $30,633 $50,000 $99, % $11,296, % $68,883 $100,000 $199, % $9,538, % $136,269 $200, % $7,685, % $284,649 Total 34, % $100,198, % $2,912 67

68 Policy Year Illinois Residual Market Reinsurance Pool Net Operating Results Estimated Net Operating Gain/(Loss) Projected to Ultimate as of 3/31/ $5, ($332) 2014 $6, $1,239 -$1,000 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 Operating Gain/(Loss) (000's) 68

69 Millions $2.5 VCAP Service Policies Illinois Assigned Risk Premium Diverted to the Voluntary Market $ $ $1.0 $0.5 $ Year 69

70 Residual Market Summary National Stable residual market share Manageable operating results Residual market premium declined slightly in 2016 High levels of customer service satisfaction Illinois Growth in policy count Decline in premium volume Relatively stable residual market share Operating results reflect self-funding in recent years Please visit ncci.com for additional state and countrywide information. 70

71 Q & A

72 Supplemental Information

73 Indemnity Benefits Constitute the Majority of Total Benefit Costs in Illinois 52.7% 47.3% 39.7% 60.3% 41.4% 58.6% Indemnity Medical Regional states are IN, IA, and MO Based on NCCI s financial data 73

74 Loss Ratio Illinois Indemnity and Medical Loss Ratios Policy Year Indemnity Medical Based on NCCI s financial data at current benefit level and developed to ultimate 74

75 What Drives Indemnity and Medical Loss Ratios? Frequency (Claims/ Premium) Indemnity Severity (Loss/Claim) Indemnity Loss Ratio (Loss/Premium) Frequency (Claims/ Premium) Medical Severity (Loss/Claim) Medical Loss Ratio (Loss/Premium) 75

76 Frequency per Million of On-Leveled Premium Illinois Lost-Time Claim Frequency Policy Year Based on NCCI s financial data Frequency of lost-time claims adjusted to a common wage level 76

77 Indemnity Average Claim Severity ($ '000s) Illinois Average Indemnity Claim Severity Policy Year Adjusted to Common Wage Level Actual Based on NCCI s financial data for lost-time claims at current benefit level and developed to ultimate 77

78 Medical Average Claim Severity ($ '000s) Illinois Average Medical Claim Severity Policy Year Adjusted to Common Wage Level Actual Based on NCCI s financial data for lost-time claims at current benefit level and developed to ultimate 78

79 Illinois Average Claim Frequency Frequency per 100,000 Workers All Claims MO 980 2,055 Total 3,035 IA 1,050 3,208 Total 4,258 IN 666 3,235 Total 3,901 IL 994 1,935 Total 2, Lost Time Medical Only Based on NCCI s Statistical Plan data 79

80 Average Indemnity Claim Severity in the Region Lost-Time Claim Severity in $ Thousands IL IN IA MO Based on NCCI s financial data for lost-time claims 80

81 Average Medical Claim Severity in the Region Lost-Time Claim Severity in $ Thousands IL IN IA MO Based on NCCI s financial data for lost-time claims 81

82 Illinois Distribution of Claims by Injury Type 66% 19% 15% 0% 76% 12% 12% 0% 75% 15% 10% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Medical Only Temporary Total Permanent Partial Fatal & Permanent Total Regional states are IN, IA, and MO Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist 82

83 Illinois Indemnity Loss Distribution by Injury Type 27% 67% 3% 3% 23% 68% 3% 6% 33% 57% 4% 6% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Temporary Total Permanent Partial Permanent Total Fatal Regional states are IN, IA, and MO Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist 83

84 Illinois Medical Loss Distribution by Injury Type 29% 56% 6% 9% 0% 24% 53% 6% 16% 1% 30% 47% 9% 13% 1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Temporary Total Permanent Partial Permanent Total Medical Only Fatal Regional states are IN, IA, and MO Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist 84

85 Glossary

86 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. 86

87 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 losttime 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. 87

88 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. 88

89 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. 89

90 Appendix

91 NCCI s Worker 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 91

92 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 92

93 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 93

94 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 94

95 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 95

96 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 96