Tennessee. October 12,

Transcription

1 Tennessee October 12,

2 Tennessee State Advisory Forum Annual Issues Symposium Bill Donnell Video Excerpt Countrywide Workers Compensation System Tennessee Workers Compensation System and Filing Activity Countrywide and Tennessee Labor Markets Legislative Issues: Countrywide and Tennessee Emerging Issue: 2017 Medical Marijuana Update Residual Market: Countrywide and Tennessee 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 (DWP) Change by Component Private Carriers NCCI States Change in Direct Written Premium: 0.0% 2016 vs Payroll +4.0% 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 Wage Rate Payroll +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 WC Approved Changes in Bureau Premium Level By Effective Year for NCCI States Percent 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 Impact of Discounting on Premium Private Carriers NCCI States p Policy Year p Preliminary Sources: NAIC s Annual Statement Statutory Page 14 and NCCI s Financial Call data NCCI benchmark level does not include a profit and contingency provision or expense constant Based on data for all states where NCCI provides ratemaking services, excluding TX 10

11 WC Impact of Discounting on Premium Private Carriers NCCI States Dividends Schedule Rating Rate/Loss Cost Departure p Policy Year p Preliminary Sources: NAIC s 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 or expense constant Based on data for all states where NCCI provides ratemaking services, excluding TX 11

12 Percent WC Combined Ratio Underwriting Gain Achieved Private Carriers p Calendar Year 3% lower p Preliminary Source: NAIC s Annual Statement data 12

13 WC Combined Ratio Components Private Carriers Percent Dividends Underwriting Expense Ratio Loss Adjustment Expense (LAE) Ratio Loss Ratio p Calendar Year p Preliminary Source: NAIC s Annual Statement data 13

14 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 14

15 WC Lost-Time Claim Frequency Change in Lost-Time Claims per $1M Pure Premium Private Carriers and State Funds NCCI States Percent 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

16 WC Average Medical Lost-Time Claim Severity Severity ($ Thousands) 35 Private Carriers and State Funds NCCI States 30 +5% -1.4% $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 +20% +14% +2% +12% 1995 to to to 2016p 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: PHC Chain-Weighted Price Index 17

18 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

19 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% -12% 1995 to to to 2016p 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 19

20 Tennessee Workers Compensation System and Filing Activity

21 Tennessee Workers Compensation System An Overview Slight increase in premium volume Combined ratio remains favorable Frequency continues to decline Stable indemnity and increasing medical costs 21

22 948 Tennessee Workers Compensation Premium Volume Direct Written Premium in $ Millions Source: NAIC s Annual Statement data Calendar Year 22

23 Impact of Discounting on Workers Compensation Premium in Tennessee 2% 3% 2% 3% 4% 1% Percent -4% -3% -6% -8% -8% -10% -8% -5% -1% -14% Policy Year Dividends Schedule Rating Rate/Loss Cost Departure Based on data through 12/31/2016 Dividend ratios are based on calendar year statistics 23

24 Tennessee Accident Year Combined Ratios by Component 96% 0% 92% 90% 0% 0% 87% 88% 0% 0% 36% 38% 38% 36% 35% 60% 53% 51% 51% 53% Loss Ratio Expense Ratio Dividend Ratio Sources: NCCI s financial data through 12/31/2016 and NAIC s Annual Statement data Accident Year 24

25 Tennessee Workers Compensation Lost-Time Claim Frequency Percent Change in Lost-Time Claims 6.7% 3.9% Cumulative Change of 32.7% ( ) Percent Change 0.1% -0.6% -0.9% -2.9% -3.7% -3.3% -2.8% -3.0% -5.0% -9.8% -7.7% -8.9% Policy Year Based on NCCI s financial data through 12/31/2016, developed to ultimate, premium adjusted to common wage level 25

26 Tennessee Average Indemnity Claim Severity Lost-Time Claim Severity in $ Thousands -1.7% 6.3% 0.9% -0.7% Cumulative Change of +0.1% ( ) 10.7% -1.8% -1.3% -1.9% -5.6% -1.4% -0.8% -2.0% -2.4% 2.8% $16.1 $15.6 $16.0 $16.4 $16.5 $16.7 $17.7 $18.1 $18.3 $18.6 $16.8 $16.9 $16.8 $15.8 $ Policy Year Based on NCCI s financial data through 12/31/2016, on-leveled and developed to ultimate 26

27 Tennessee Average Medical Claim Severity Lost-Time Claim Severity in $ Thousands Cumulative Change of +74.0% ( ) 10.3% -3.6% 4.9% 9.8% 3.3% -0.6% 7.1% 7.2% 11.5% 10.1% 3.6% 5.3% -8.9% -1.3% $34.2 $32.0 $32.2 $31.1 $28.3 $28.7 $31.5 $30.0 $31.2 $28.3 $26.8 $25.9 $23.5 $21.1 $ Policy Year Based on NCCI s financial data through 12/31/2016, on-leveled and developed to ultimate 27

28 Tennessee Filing Activity Voluntary Loss Cost and Assigned Risk Rate Changes 4.2% -0.9% -2.7% -2.7% -4.5% -7.0% -5.9% -5.9% -7.0% -8.2% -10.7% -12.8% -12.6% -12.2% *Pending 3/1/2014 7/1/2014 3/1/2015 3/1/2016 8/28/2016 3/1/2017 3/1/2018* Voluntary Assigned Risk 28

29 Tennessee March 1, 2018 Loss Cost Filing Overall Loss Cost Level Change 12.6% Change in Experience 11.1% Change in Trend 1.9% Change in Benefits +0.5% Change in LAE 0.3% 29

30 Tennessee March 1, 2018 Filing Average Changes by Industry Group Overall Change 12.6% Manufacturing 11.3% Contracting 15.0% Office & Clerical 13.2% Goods & Services 12.9% Miscellaneous 11.4% 30

31 Percent 15 Current NCCI Voluntary Market Loss Cost/Rate Level Changes Excludes Law-Only Filings OKNMOR AL NHMDCO TN NC CT IL NVWVLA FL IN UT IA AR AK VT MT TX KS AZMS KY RI ME NE DCMO HI ID SDGA VA 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

32 Current Voluntary Market Rates/Loss Costs Southeastern NAIC Zone South Carolina 9/1/ % Virginia* 4/1/ % Georgia 3/1/17 0.5% Kentucky 10/1/17 4.6% Mississippi 3/1/17 6.1% Arkansas 7/1/17 8.4% Florida* 1/1/18 9.3% Louisiana 5/1/17 9.8% West Virginia 11/1/ % North Carolina* 4/1/ % Tennessee* 3/1/ % Alabama* 3/1/ % *Pending 32

33 Current Average Voluntary Pure Loss Costs Using Tennessee Payroll Distribution Pure Loss Cost All Classes TN AL AR GA KY MS NC VA Region Country Based on the latest NCCI approved rates and loss costs in the various states 33

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

35 Countrywide and Tennessee Labor Markets

36 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 36

37 Percent 4 Change in Private Employment Private Employment Growth Is Above Average Tennessee United States Q1 2016Q1 2017Q1 Year-on-year percentage change; employment is for Total Private Industry Frequency of observation: quarterly; latest available data point: 2017 Q1 Sources: US Bureau of Labor Statistics, Moody s Analytics, and NCCI 37

38 Percent 4 Change in Average Weekly Wages Wage Growth Is Above the Rest of the Nation Tennessee United States Q1 2016Q1 2017Q1 Year-on-year percentage change; wages are for Total Private Industry Frequency of observation: quarterly; latest available data point: 2017 Q1 Sources: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody s Analytics, and NCCI 38

39 Private Industry Payroll Growth Decomposition Payroll Growth Is Outpacing the Nation Percent % % +3.9% Payroll % AWW % +1.7% Employment 0 Tennessee United States 2017 Q1 year-on-year percentage change; AWW = Average Weekly Wage Sources: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody s Analytics, and NCCI 39

40 Change in Employment by Industry Employment in Most Industries Has Increased in the Past Year Industrial Sector Leisure and hospitality Trade, transportation, and utilities Professional and business services Manufacturing Construction Government Education and health services Financial activities Other services Information Natural resources and mining Year-Over-Year Percent Change, 2017Q1 Sector Size % Share 1-Year Change TN , ,000 US +1.9 TN , ,600 US +1.0 TN , ,100 US +3.1 TN , ,900 US +0.0 TN , ,800 US +2.8 TN , ,200 US +0.8 TN , ,100 US +2.4 TN , ,800 US +2.2 TN , ,600 US +1.0 TN , US 0.9 TN 4.5 5, US 2.1 Employment numbers are rounded to the nearest hundred Year-on-year percentage change; frequency of observation: quarterly; latest available data point: 2017 Q1 Sources: US Bureau of Labor Statistics, Moody s Analytics, and NCCI 40

41 Tennessee s Payroll Growth Decomposition by Sector Employment Growth + AWW Growth Payroll Growth 10% 5% 0 +5% +10% Trade, transportation, and utilities Professional and business services Education and health services Manufacturing Government Financial activities Leisure and hospitality Construction Other services Information Natural resources and mining 10% 5% 0 +5% +10% 10% 5% 0 +5% +10% 2017 Q1 year-on-year percentage change; AWW = Average Weekly Wage; sectors are in descending order by the volume of state payroll amounts Sources: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody s Analytics, and NCCI 41

42 Headline Unemployment Rate The Unemployment Rate Is Below Average Percent US: 4.3% TN: 3.4% Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Headline unemployment rate, seasonally adjusted Frequency of observation: monthly; latest available data point: July 2017 Source: US Bureau of Labor Statistics (BLS), 42

43 Tennessee s Labor Market Tennessee s unemployment rate is below the US rate Payroll growth in Tennessee is above the nation Payroll has grown in all sectors except Natural Resources and Mining Construction posted the fastest growth driven by gains in both employment and average weekly wages Average weekly wages have grown in most sectors Employment growth is above the US rate Leisure and Hospitality added the most jobs Trade, Transportation, and Utilities and Professional and Business Services also added a large number of jobs Construction grew at the fastest rate 43

44 Legislative Issues

45 2017 Countrywide 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 compensation-related 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. 45

46 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 7/1/

47 Key Countrywide Workers Compensation-Related Themes in Introduced Legislation First Responder Presumptions Indemnity Benefits Medical Cost Management Definitions 47

48 Federal Legislative and Regulatory Issues Impacting the Workers Compensation System NCCI engages Congress and federal agencies regarding issues impacting the state-based workers compensation system NCCI provides insights and information on the system to several agencies including: US Department of Labor (USDOL) National Institute for Occupational Safety and Health (NIOSH) Government Accountability Office (GAO) US Department of Treasury 48

49 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 Trump Administration SSDI Reverse Offset Proposal Medicare Set-Aside (MSA) Reform Legislation to be introduced to bring greater efficiency to MSA Process Congressional Budget Office scoring 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 Marijuana Legalization Status 52

53 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 53

54 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. 54

55 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 55

56 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. 56

57 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. 57

58 58 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 A self-insured employer is to reimburse costs for reasonable and proper use of medical marijuana under the state s WC and medical marijuana law. 58

59 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/carriers to pay for medical marijuana for injured workers did not pass 59

60 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? 60

61 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. 61

62 62 62

63 Residual Market: Countrywide and Tennessee

64 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 64

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

66 Tennessee Residual Market As of 12/31/2016 Policy Year 2016 Estimated Plan Premium $63M Policy Year 2016 Plan Policy Count 13,565 Calendar Year 2016 Residual Market Share 8.4%* *Preliminary 66

67 Tennessee 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 9, % $7,840, % $851 $2,500 $4,999 1, % $6,503, % $3,544 $5,000 $9,999 1, % $8,575, % $7,017 $10,000 $19, % $9,925, % $13,558 $20,000 $49, % $11,668, % $30,544 $50,000 $99, % $8,910, % $69,075 $100,000 $199, % $6,271, % $142,540 $200, % $3,595, % $276,595 Total 13, % $63,290, % $4,666 67

68 Policy Year Tennessee Residual Market Reinsurance Pool Net Operating Results Estimated Net Operating Gain/(Loss) Projected to Ultimate as of 12/31/ ($3,871) 2015 ($600) -$5,000 -$4,000 -$3,000 -$2,000 -$1,000 $0 Operating Gain/(Loss) (000's) 68

69 Residual Market Summary National Stable residual market share Manageable operating results Residual market premium declined slightly in 2016 High levels of customer service satisfaction State Decline in premium volume Relatively stable residual market share Self-funded operating results Please visit ncci.com for additional state and countrywide information. 69

70 Q & A

71 Supplemental Information: Loss Cost Filing Support

72 Loss Ratio Tennessee Indemnity and Medical Loss Ratios Policy Year Indemnity Medical Based on NCCI s financial data through 12/31/2016 at current benefit level and developed to ultimate 72

73 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) 73

74 Frequency per Million of On-Leveled Premium Tennessee Claim Frequency Policy Year Based on NCCI s financial data through 12/31/2016 adjusted to a common wage level 74

75 Tennessee Average Indemnity Claim Severity Average Indemnity Claim Severity ($ '000s) Policy Year AY 2016 Adjusted to Common Wage Level Actual Based on NCCI s financial data through 12/31/2016 for lost-time claims at current benefit level and developed to ultimate 75

76 Average Medical Claim Severity ($ '000s) Tennessee Average Medical Claim Severity Policy Year AY 2016 Adjusted to Common Wage Level Actual Based on NCCI s financial data through 12/31/2016 for lost-time claims at current benefit level and developed to ultimate 76

77 Supplemental Information: National/Regional Comparisons

78 Pure Loss Costs All Classes Current Average Voluntary Pure Loss Costs Using Tennessee Payroll Distribution TX WV AR IN UT OR DC NV KS TN NM AZ MD MS VA SD KY MO NC AL NE IA HI LA ID CO FL OK NH SC GA ME RI MT AK IL VT CT CW State Based on the latest NCCI approved rates and loss costs in the various states 78

79 Medical Benefits Constitute the Majority of Total Benefit Costs in Tennessee Indemnity Medical 30.3% 69.7% 44.2% 55.8% 41.6% 58.4% Regional states are AL, AR, GA, KY, MS, NC, and VA Based on NCCI s financial data through 12/31/

80 Tennessee Average Claim Frequency Frequency per 100,000 Workers All Claims VA 455 1,896 Total 2,351 NC 660 2,021 Total 2,681 MS 830 2,060 Total 2,890 KY 723 2,995 Total 3,718 GA 698 2,151 Total 2,849 AR 520 2,184 Total 2,704 AL 661 2,523 Total 3,184 TN 821 2,801 Total 3, Lost Time Medical Only Based on NCCI s Statistical Plan data 80

81 Average Indemnity Claim Severity in the Region Lost-Time Claim Severity in $ Thousands TN AL AR GA KY MS NC VA Based on NCCI s financial data. 81

82 Average Medical Claim Severity in the Region Lost-Time Claim Severity in $ Thousands TN AL AR GA KY MS NC VA Based on NCCI s financial data. 82

83 Tennessee Distribution of Claims by Injury Type 78% 13% 9% 0% 78% 14% 8% 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 AL, AR, GA, KY, MS, NC, and VA Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist 83

84 Tennessee Indemnity Loss Distribution by Injury Type 1% 37% 58% 4% 42% 52% 3% 3% 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 AL, AR, GA, KY, MS, NC, and VA Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist 84

85 Tennessee Medical Loss Distribution by Injury Type 28% 57% 3% 10% 2% 35% 41% 11% 12% 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 AL, AR, GA, KY, MS, NC, and VA Based on NCCI s Statistical Plan data for jurisdiction/claim type combinations for which three or more cases exist 85

86 Glossary

87 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. 87

88 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. 88

89 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. 89

90 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. 90

91 Appendix

92 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 92

93 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 93

94 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 94

95 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 95

96 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 96

97 Valuation of Statistical Plan Data 1st Report Valuation 2nd Report Valuation 3rd Report Valuation 4th Report Valuation 5th Report Valuation Policy Effective 18 Months 42 Months 66 Months 30 Months 54 Months 97