Nevada. March 6,

Transcription

1 Nevada March 6,

2 Nevada State Advisory Forum Annual Issues Symposium (AIS): Bill Donnell Video Excerpt Countrywide Workers Compensation System Nevada s Workers Compensation System and Filing Activity Guest Speaker: JD Decker, Administrator, Nevada Division of Industrial Relations Countrywide and Nevada Labor Markets Legislative Issues Emerging Issue: Medical Marijuana Update Residual Market: Countrywide and Nevada Q & A 2

3 2017 Annual Issues Symposium (AIS) 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 increased 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 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 Calendar Year 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, relative to those previously approved in NCCI states only IN and NC are filed in cooperation with state rating bureaus 9

10 WC Impact of Discounting on Premium Private Carriers NCCI States Percent 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 WC Combined Ratio Underwriting Gain Achieved Private Carriers Percent % lower p Calendar Year p Preliminary Source: NAIC s Annual Statement data 12

13 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 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 Percent 5 WC Lost-Time Claim Frequency Change in Lost-Time Claims per $1M Pure Premium Private Carriers and State Funds NCCI States 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 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

17 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 17

18 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

19 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: Personal Health Care Chain-Weighted Price Index 19

20 Nevada s Workers Compensation System

21 Nevada s Workers Compensation System An Overview Premium volume continues to increase Accident Year combined ratio increased in the latest year Lost-time claim frequency has declined in recent years Indemnity and medical severity remain relatively stable 21

22 Nevada 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 Nevada 7% 6% 3% 3% 3% 1% 0% 3% 3% 0% Percent -2% -1% -8% -3% -3% 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 Nevada Accident Year Combined Ratios by Component 111% 0% 105% 0% 91% 0% 96% 0% 106% 0% 38% 36% 36% 31% 35% 73% 69% 60% 60% 70% 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 Nevada Workers Compensation Lost-Time Claim Frequency Lost-Time Claims Cumulative Change of 39.5% ( ) Percent Change -10.0% -7.0% -0.4% -4.3% -9.1% -3.9% -8.8% 3.2% 5.4% -1.9% 1.6% -7.2% -5.1% -0.3% Policy Year Based on NCCI s financial data through 12/31/2016, developed to ultimate, and premium adjusted to common wage level 25

26 Nevada Average Indemnity Claim Severity Lost-Time Claim Severity in $ Thousands +11.8% +10.0% -11.0% Cumulative Change of 2.3% ( ) -3.1% +12.1% -16.8% +2.5% -3.3% +5.6% -0.4% -5.4% $24.1 $25.5 $25.6 $24.2 $25.0 $24.4 $29.3 $33.0 $30.0 $26.8 $23.9 $ Policy Year Based on NCCI s financial data through 12/31/2016, on-leveled and developed to ultimate 26

27 Nevada Average Medical Claim Severity Lost-Time Claim Severity in $ Thousands Cumulative Change of +6.2% ( ) -6.7% +25.7% -8.4% -0.1% +2.6% -9.6% +6.7% -5.8% +2.3% -0.3% +3.9% $31.8 $30.6 $30.7 $30.0 $31.9 $29.8 $33.0 $32.2 $32.2 $35.1 $27.9 $ Policy Year Based on NCCI s financial data through 12/31/2016, on-leveled and developed to ultimate 27

28 Nevada Filing Activity Voluntary Loss Cost and Assigned Risk Rate Changes 4.7% 4.7% 0.2% -0.5% -2.3% -5.0% -5.5% -4.2% -10.7% -10.5% 3/1/2015 3/1/2016 3/1/2017 3/1/2018 3/15/2018* Voluntary Assigned Risk *Law-only filing 28

29 Nevada March 1, 2018 Loss Cost Filing Overall Loss Cost Level Change: 2.3% Change in Experience: 3.1% Change in Trend: 0.0% Change in Benefits: 0.9% Change in All Other: 0.1% 29

30 Nevada March 1, 2018 Filing Average Changes by Industry Group Overall Change: 2.3% Manufacturing: 1.5% Nevada Contracting: 1.2% Office & Clerical: 3.2% Goods & Services: 3.7% Miscellaneous: 1.1% 30

31 Percent Current NCCI Voluntary Market Loss Cost/Rate Level Changes Excludes Law-Only Filings OK NM CT OR AL TX NH MD IN CO TN ME NC IL MT WV FL UT GA IA AR AK KS NE SC AZ MS ID KY RI VT DC MO NV HI SD VA LA 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 Western NAIC Zone Hawaii 1/1/18 1.7% Nevada 3/1/18 2.3% Idaho 1/1/18 5.8% Arizona 1/1/18 6.4% Alaska 1/1/18 7.9% Utah 12/1/17 9.4% Montana* 7/1/ % Colorado 1/1/ % Texas* 7/1/ % Oregon 1/1/ % New Mexico 1/1/ % *Pending 32

33 Current Average Voluntary Pure Loss Costs Using Nevada Payroll Distribution Pure Loss Cost All Classes NV AZ CO NM UT 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 Guest Speaker JD Decker, Administrator Nevada Division of Industrial Relations

36 Countrywide and Nevada Labor Markets

37 National Economic Highlights and Their Impact on Workers Compensation National Economic Indicator Slowing growth in private employment is expected to continue Wage growth is increasing and expected to accelerate Medical inflation is forecast to rise Short-term interest rates have increased; longer-term rates are also expected to increase next year Potential Impact on the Workers Compensation Market Payroll and premium growth will also slow down Upward pressure on payroll and premium growth as well as indemnity severity Increases in medical costs per claim Investment yields will increase across the spectrum of bond maturities 37

38 Change in Private Employment Private Employment Growth Is Well Above Average Percent 4 Nevada United States Q Q Q2 Year-on-year percentage change; employment is for Total Private Industry Frequency of observation: quarterly; 2014 Q Q2 Sources: US Bureau of Labor Statistics, Moody s Analytics, and NCCI 38

39 Change in Average Weekly Wages Wage Growth Is Below the Rest of the Nation Percent 4 Nevada United States Q Q Q2 Year-on-year percentage change; wages are for Total Private Industry Frequency of observation: quarterly; 2014 Q Q2 Sources: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody s Analytics, and NCCI 39

40 Private Industry Payroll Growth Decomposition Payroll Growth Is Higher Than the Nation Percent % +3.6% % Payroll % +0.8% AWW % Employment 0 Nevada United States AWW = Average Weekly Wage 2017 Q2 year-on-year percentage change Sources: US Bureau of Labor Statistics, Bureau of Economic Analysis, Moody s Analytics, and NCCI 40

41 Change in Employment by Industry Employment in Most Industries Has Increased in the Past Year Industrial Sector Professional and business services Construction Leisure and hospitality Education and health services Government Trade, transportation, and utilities Other services Manufacturing Financial activities Natural resources and mining Information Year-Over-Year Percent Change, 2017Q2 Sector Size % Share 1-Year Change NV , ,400 US +3.1 NV , ,800 US +2.8 NV , ,300 US +2.1 NV , ,700 US +2.3 NV , ,900 US +0.6 NV , ,400 US +0.6 NV , ,100 US +1.2 NV , ,900 US +0.5 NV , US +2.0 NV , US +2.9 NV , US 1.5 Employment numbers are rounded to the nearest hundred Year-on-year percentage change; frequency of observation: quarterly; 2017 Q2 Sources: US Bureau of Labor Statistics, Moody s Analytics, and NCCI 41

42 Nevada s Payroll Growth Decomposition by Sector Employment Growth + AWW Growth Payroll Growth 10% 0 +10% +20% Leisure and hospitality Trade, transportation, and utilities Professional and business services Government Education and health services Construction Financial activities Manufacturing Other services Natural resources and mining Information 10% 0 +10% +20% 10% 0 +10% +20% AWW = Average Weekly Wage 2017 Q2 year-on-year percentage change; 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 42

43 Percent 6 Headline Unemployment Rate Unemployment Rate Is Higher Than the National Rate 5 NV: 5.0% 4 US: 4.1% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Headline Unemployment Rate, seasonally adjusted Frequency of observation: monthly; latest available data point: December 2017 Source: US Bureau of Labor Statistics (BLS), 43

44 Nevada s Labor Market Nevada s unemployment rate is above the US rate Payroll increased in Nevada, primarily driven by strong increases in employment rather than wages Growth was flat in Leisure and Hospitality, the largest payroll in Nevada Payroll grew fastest in the Construction sector Manufacturing payroll expanded from increases in both employment and average weekly wages Employment growth is well above the US rate Professional and Business Services added the most jobs Construction also added a large number of jobs and grew at the fastest rate 44

45 Legislative Issues

46 2017 Workers Compensation Legislative Activity CA OR WA NV ID UT MT WY CO ND SD NE KS MN IA MO WI IL MI IN OH KY WV PA VA NY ME VT NH MA CT NJ DE MD DC 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 Top Five WC Legislative Trends 2017 First Responders Firefighters Volunteers Presumptions Reimbursement/Fee Schedules Court/Legal Issues Coverage Issues Indemnity Benefits 47

48 Anticipated Legislative Issues 2018 First Responders Fee Schedules Prescription Drugs Attorney Fees Marijuana 48

49 Federal Legislative and Regulatory Issues Impacting the Workers Compensation System NCCI works with Congress and federal agencies to provide information regarding issues that impact the state-based workers compensation system NCCI works closely with many federal agencies, including: US Department of Labor (USDOL) National Institute for Occupational Safety and Health (NIOSH) Government Accountability Office (GAO) US Department of the Treasury 49

50 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 the MSA Process Congressional Budget Office scoring 50

51 Nevada Legislative Activity Adoption of Actuarial Annuity Table, pursuant to NRS 616C.495(5) Increase of 4.7% effective March 15, : Lump-sum factors for Permanent Partial Disability awards to reflect: Most recent IRS mortality tables Average 30-year Treasury Constant Maturity Rate for March 51

52 Emerging Issue: The Legalization of Marijuana and Its Impact on Workers Compensation

53 State Activity Medical Marijuana 29 Plus Washington, DC have legalized medical marijuana Recreational Marijuana 9 Plus Washington, DC have legalized recreational marijuana 53

54 Marijuana Legalization Status 54

55 Federal Activity Federal level Marijuana is an illegal Schedule I drug under the Controlled Substances Act August 2016 The US Drug Enforcement Administration announced it will not reclassify marijuana January 2018 The US Department of Justice rescinded former Administration s policy guidance regarding federal intervention in states that have legalized marijuana. 55

56 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. 56

57 New Mexico Court of Appeals Vialpando v. Ben s Automotive Services and Redwood Fire & Casualty (2014) An insurer MUST reimburse a qualified workers comp claimant for the cost of medical marijuana to treat low back pain Appealed to NM Supreme Court: Certiorari denied 57

58 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. 58

59 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. 59

60 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. 60

61 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 61

62 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? 62

63 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. 63

64 64

65 Residual Market: Countrywide and Nevada

66 Where Does NCCI Provide Residual Market Services? As of January 2018, 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 2018, 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 66

67 Residual Market Video Excerpt Jim Nau, General Manager Residual Markets

68 $ Millions $30 $25 Nevada Total Residual Market Plan Estimated Premium Volume Premium in $ Millions as of 12/31/2017 $23.6 $23.3 $25.9 $21.7 $23.5 $21.4 $20 $15 $15.2 $11.5 $13.1 $17.3 $10 $5 $ Policy Year 68

69 Nevada Residual Market Share Plan Premium as a Percentage of Direct Written Premium 10% 9% 9.5% 8.8% 8% 7% 7.4% 7.2% 7.5% 6% 5% 4% 3% 2% 1% 0% * Calendar Year *Preliminary 69

70 6,000 5,000 4,000 Nevada Total Residual Market Plan Policy Counts As of 12/31/2017 5,369 4,284 3,710 3,568 3,583 4,417 4,927 4,698 5,064 5,231 3,000 2,000 1, Policy Year 70

71 Nevada Residual Market Change in Total Estimated Annual Premium As of 12/31/2017 Size of Risk Change $0 $2,499 $ 3.5 M $ 3.6 M 3.0% $2,500 $4, M 2.4 M 7.2% $5,000 $9, M 3.3 M 10.9% $10,000 $49, M 7.1 M -12.8% $50,000 $99, M 1.9 M -17.4% $100,000 and Over 4.3 M 3.1 M -27.9% Total $23.5 M $21.4 M -8.8% 71

72 Nevada Average Size Accounts for Residual Market Policies and Estimated Premium As of 12/31/2017 Premium Range Policy Count % of Policies Total Premium % of Premium Average Policy Size $0 $2,499 3, % $ 3,558, % $ 970 $2,500 $4, % 2,431, % 3,618 $5,000 $9, % 3,297, % 7,001 $10,000 $19, % 3,512, % 13,775 $20,000 $49, % 3,571, % 29,764 $50,000 $99, % 1,948, % 69,589 $100,000 $199, % 1,766, % 147,234 $200, % 1,332, % 266,469 Total 5, % $21,420, % $ 4,095 72

73 Assigned Risk Plan Policies and Estimated Premium By State as of 12/31/2017 State Total Policy Count Total Premium AK 7,447 $ 32,913,217 AL 1,633 8,361,801 AR 6,710 22,701,009 AZ 5,920 38,003,121 CT 15,016 44,461,993 DC 1,112 5,728,551 GA 22,380 67,735,817 IA 4,393 29,965,495 ID 926 2,387,891 IL 34,180 95,922,381 IN 9,069 47,110,014 KS 8,971 28,377,777 MS 2,593 14,802,935 NH 4,932 17,152,497 NM 1,905 7,000,470 NV 5,231 21,420,626 OR 9,034 37,126,788 SC 13,688 34,891,541 SD 1,443 7,634,361 TN 12,945 61,798,405 VA 16,237 61,867,898 VT 3,834 18,042,849 WV 2,373 16,417,054 Total 191,972 $721,824,491 73

74 Nevada Residual Market Reinsurance Pool Net Operating Results Estimated Net Operating Gain/(Loss) Projected to Ultimate as of 9/30/ $3,124 Policy Year $5, $1, $2,604 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 Operating Gain/(Loss) (000's) 74

75 Residual Market Summary National Stable residual market share Manageable operating results Residual market premium declined slightly in 2017 High levels of customer service satisfaction Nevada Decrease in premium volume Slight increase in residual market share Self-funded operating results Please visit ncci.com for additional state and countrywide information. 75

76 Q & A

77 Supplemental Information

78 Total Benefit Costs in Nevada Indemnity Medical 43.6% 56.4% 34.3% 65.7% 41.6% 58.4% Regional states are AZ, CO, NM, and UT Based on NCCI s financial data through 12/31/

79 Nevada Indemnity and Medical Loss Ratios Loss Ratio Policy Year Indemnity Medical Based on NCCI s financial data through 12/31/2016 at current benefit level and developed to ultimate 79

80 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) 80

81 Nevada Claim Frequency Frequency per Million of On-Leveled Premium Policy Year Based on NCCI s financial data through 12/31/2016 adjusted to a common wage level 81

82 Nevada Average Indemnity Claim Severity 35 Average Indemnity Claim Severity ($ '000s) AY 2016 Policy Year 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 82

83 Nevada Average Medical Claim Severity Average Medical Claim Severity ($ '000s) AY 2016 Policy Year 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 83

84 Current Average Voluntary Pure Loss Costs Using Nevada Payroll Distribution 3 Pure Loss Costs All Classes TX AR WV IN UT KS NV TN OR AZ DC MS NC VA AL NM NE SD OK KY MD CO HI MO NH ID IA LA FL SC IL GA ME RI AK MT CT VT CW State Based on the latest NCCI approved rates and loss costs in the various states 84

85 Nevada Average Claim Frequency Frequency per 100,000 Workers All Claims UT 874 4,347 Total 5,221 NM 1,068 3,574 Total 4,642 CO 1,311 4,491 Total 5,802 AZ 822 4,031 Total 4,853 NV 1,061 4,082 Total 5, Lost Time Medical Only Based on NCCI s Statistical Plan data Adjusted to the Nevada capped payroll basis 85

86 Average Indemnity Claim Severity in the Region Lost-Time Claim Severity in $ Thousands Based on NCCI s financial data NV AZ CO NM UT PY 2013 PY

87 Average Medical Claim Severity in the Region Lost-Time Claim Severity in $ Thousands Based on NCCI s financial data NV AZ CO NM UT PY 2013 PY

88 Nevada Distribution of Claims by Injury Type 80.0% 13.0% 7.0% 0.0% 80.0% 12.0% 8.0% 0.0% 75.0% 15.0% 10.0% 0.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Medical Only Temporary Total Permanent Partial Fatal & Permanent Total Regional states are AZ, CO, NM, and UT Based on NCCI s Statistical Plan data for jurisdictions/claim type combinations for which three or more cases exist 88

89 Nevada Indemnity Loss Distribution by Injury Type 21% 67% 0% 12% 24% 62% 5% 9% 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 AZ, CO, NM, and UT Based on NCCI s Statistical Plan data for jurisdictions/claim type combinations for which three or more cases exist 89

90 Nevada Medical Loss Distribution by Injury Type 22% 60% 0% 16% 2% 22% 52% 9% 15% 2% 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 AZ, CO, NM, and UT Based on NCCI s Statistical Plan data for jurisdictions/claim type combinations for which three or more cases exist 90

91 Glossary

92 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. 92

93 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. 93

94 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. 94

95 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. 95

96 Appendix

97 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 97

98 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 98

99 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 99

100 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 100

101 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 101

102 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 102