January 1, 2019 Pure Premium Rate Filing

Transcription

1 January 1, 2019 Pure Premium Rate Filing WCIRB Executive Summary October 5, 2018 California Department of Insurance Public Hearing

2 ANTITRUST NOTICE As members of the Workers Compensation Insurance Rating Bureau of California (WCIRB) and their agents, you are bound, when involved in presentations, meetings or other activities of the WCIRB, to limit your actions (and discussions other than social ones) to matters relating to the business of the WCIRB. Matters that do not relate directly to WCIRB business should be avoided. Members and their agents should particularly avoid discussions or conduct that could be construed as intended to affect competition (or access to markets). Thus, as members and their agents, you should not discuss or pursue the business interests of individual insurers or others, including, in particular, the plans of individual members involving, or the possibility or desirability of (a) raising, lowering, or stabilizing prices (premiums or commissions); (b) doing business or refusing to do business with particular, or classes of, insurers, reinsurers, agents, brokers, or insureds, or in particular locales; or (c) potential actions that would affect the availability of products or service either generally or in specific markets or locales. NOTICE & COPYRIGHT This presentation was developed by the Workers' Compensation Insurance Rating Bureau of California (WCIRB) for informational purposes only. The WCIRB shall not be liable for any damages of any kind, whether direct, indirect, incidental, punitive or consequential, arising from the use, inability to use, or reliance upon information provided in this presentation Workers Compensation Insurance Rating Bureau of California. All rights reserved. No part of this work may be reproduced or transmitted in any form or by any means, electronic or mechanical, including, without limitation, photocopying and recording, or by any information storage or retrieval system without the prior written permission of the Workers Compensation Insurance Rating Bureau of California (WCIRB), unless such copying is expressly permitted by federal copyright law. No copyright is claimed in the test of statutes and regulations quoted within this work. Each WCIRB member company (Company) is authorized to reproduce any part of this work solely for the purpose of transacting workers compensation insurance. This reproduction right does not include the right to make any part of this work available on any website or on any form of social media. Workers Compensation Insurance Rating Bureau of California, WCIRB, WCIRB California, WCIRB Connect, WCIRB CompEssentials, X-Mod Direct, escad, Comprehensive Risk Summary and the WCIRB California logo (WCIRB Marks) are registered trademarks or service marks of the WCIRB. WCIRB Marks may not be displayed or used in any manner without the WCIRB s prior written permission. Any permitted copying of this work must maintain any and all trademarks and/or service marks on all copies. To seek permission to use any of the WCIRB Marks or any copyrighted material, please contact the Workers Compensation Insurance Rating Bureau of California at customerservice@wcirb.com.

3 Average Advisory Pure Premium Rates Rate per $100 of payroll $3.00 $2.50 $2.00 $1.50 $1.00 $2.81 Average Approved 1/1/2015 $1.84 WCIRB Proposed Average 7/1/2018 $1.78 Average Approved 7/1/2018 $2.13 Industry Average Filed 7/1/2018 Source: WCIRB pure premium rate filings and CDI rate decisions. Rates have been restated based on the most currently available payroll weights. $1.70 $1.68 WCIRB Proposed Average 1/1/2019 WCIRB Indicated Average 1/1/2019 Based on 6/30/18 2

4 Advisory Pure Premium Rate by Component Medical Indemnity Loss Adjustment Expenses $3 $2.84 $2 $1 $0 $0.62 (22%) $2.52 $2.50 $2.35 $2.25 $0.62 (25%) $0.65 (26%) $0.62 (27%) $0.61 (27%) $0.81 (28%) $0.73 (29%) $0.71 (29%) $0.71 (30%) $0.68 (30%) $0.52 (25%) $0.50 (25%) $1.41 (50%) $1.17 (46%) $1.14 (45%) $1.02 (43%) $0.96 (43%) $0.88 (43%) $0.86 (43%) $0.78 (42%) $0.70 (41%) 1/1/2015 7/1/2015 1/1/2016 7/1/2016 1/1/2017 7/1/2017 1/1/2018 7/1/2018 1/1/19 Filing Source: WCIRB pure premium rate filings. Rates have been restated based on the most currently available payroll weights. $2.05 $2.01 $1.84 $1.70 $0.47 (25%) $0.46 (27%) $0.65 (32%) $0.65 (32%) $0.59 (33%) $0.54 (32%) 3

5 Drivers of Indicated Pure Premium Rate Change $2.00 $1.90 $1.80 $1.70 $1.60 $1.50 July 1, 2018 Filing $1.84 Indicated 7/1/18 Advisory PPRate 4.5% Reduction $1.76 Updated 3/31/18 Loss & LAE Experience 3% Reduction $1.70 Loss Development Methodology Refinements 1.5% Reduction $1.68 Severity Trend Projection Adjustments January 1, 2019 Filing 1.5% Increase $1.70 New ULAE Allocation Methodology 1% Decrease $1.68 Loss Development 6/30/18 Experience 4

6 January 1, 2019 Pure Premium Rate Filing January 1, 2019 Indicated Average Pure Premium Rate: $ % Below Average Approved 7/1/18 Pure Premium Rate June 30, 2018 Experience Provided to CDI (lowers indication by 1%) Methodology Refinements Loss Development Severity Trend Projections ULAE Apportionment Method Areas Being Monitored Cumulative Trauma Claims Liens Historical Reform Impacts Claim Settlement Rates Pharmaceutical Costs & Drug Formulary Loss Adjustment Expenses 5

7 Medical Loss Development Projected Ultimate Medical Loss Ratios /31/2016 3/31/2017 6/30/ /31/2017 3/31/2018 6/30/ Note: All loss ratios are adjusted to the loss development methodology reflected in the 1/1/2019 Filing and may not be comparable to the actual loss ratios projected at that time. 6

8 Medical Loss Development Projected Loss Ratios Under Alternative Development Methods 0.50 CDI July 1, 2018 Decision Bickmore January 1, 2019 Filing Bickmore July 1, Filing Latest Yr Inc Avg of SB 863, SB 1160 & Claim Settle-Adj Paid & Latest Year Adj. Inc % to SB 863, SB 1160 & Settle-Adj Paid; 25% to Unadj Inc WCIRB January 1, 2019 Filing Latest Yr Paid Adj for SB 1160 and Claim Settlement Avg of SB 1160 & Settle-Adj Paid and Updated 3-Yr Avg Case Res-Adj Inc WCIRB July 1, 2018 Filing Source: WCIRB aggregate financial data as of March 31, 2018 and the trending methodology reflected in the January 1, 2019 Pure Premium Rate Filing Latest Yr Paid Adj for SB 863 & SB 1160 and Claim Settlement Latest Year Paid 7

9 Medical Trend Average Medical per Indemnity Claim $50,000 $40,000 $30,000 $20,000 $10,000 $0 8,821 Post-1989 Reform Act ( ) 9% Annual Trend 13,438 Post-Minniear Period ( ) 13% Annual Trend 32,486 SB 899 Reform Period ( ) -3% Annual Trend Post-SB 899 Reform Period ( ) 6% Annual Trend 29,556 Source: WCIRB projections as of 3/31/2018. Includes MCCP costs in all years for consistency. Minniear v. Mount San Antonio Community College District (1996) 61 Cal. Comp. Cases 1055 (Appeals Board en banc opinion). 41,334 33, Accident Year SB 863 Period ( ) -5% Annual Trend Post-SB 863 Period ( ) 1% Annual Trend Long-Term Annual Medical Inflation Trends ( ): Including Reform Periods: +5% Excluding Reform Periods: +9% 34,414 8

10 Medical Trend PY 2019 Projected Medical Paid by Year 20% 16% 12% 8% 4% 0% 6.3% 50% of Total Medical Paid in % 15.8% 11.1% 7.7% 5.3% 3.8% 3.1% Source: WCIRB aggregate financial data and projections of paid medical as of December 31, % 2.4% 25% of Total Medical Paid in 2029 or Later 8.6% 5.1% 12.7% & Later 9

11 12/31/12 12/31/17 Medical Trend California Medical Loss Payout 100% % of Ultimate Accident Year Medical Losses Paid at 36 Months by State 80% 60% 40% 20% 0% IN RI CO TX IL ID WI MO KS IA MA FL AK OR NC GA NE ME AR MI HI PA MS OK NH SD VT NJ UT VA AZ SC DC LA CT NM MN TN KY NV AL MD MT NY DE CA CA Source: 2017 NCCI Annual Statistical Bulletin and WCIRB aggregate financial data calls. Median = 68%

12 Medical Trend Projected On-Level Severity Trend 10% 5% 0% -5% 7.7% 9.0% 5.8% 5.6% 0.1% 2.0% -1.3% Source: WCIRB aggregate financial data and projections as of March 31, Excludes MCCP costs. 1.5% 1.9% -0.1% -0.7% Historical Medical Severity Trend Rates Accident Year California Workers Compensation: +6.1% +2.3% +0.8% NCCI States: % +3.1% Medical CPI: % +3.7% WCIRB Recommendation: +2.5% 3.2% 11

13 ULAE Projection Ratios of Paid ULAE to Paid Losses 20% National Insurers - Paid Loss Apportionment (7/1/18 Filing Method) National Insurers - Open Indemnity Count Apportionment (1/1/19 Filing Method) 10% 0% 10.2% 12.8% 11.1% Calendar Year Source: WCIRB aggregate financial data as of December 31, % 12

14 ULAE Projection Ratios of Paid ULAE to Paid Losses National Insurers California-focused Private Insurers* 25% 20% 15% 10% 5% 0% 17.3% 15.9% 6.4% 6.5% 6.4% 15.0% 8.5% 16.3% 7.7% 10.2% Source: WCIRB aggregate financial data as of December 31, * California-focused Private Insurers are insurers with at least 80% of their workers compensation writings in California. 14.7% 14.8% 14.2% 12.8% 15.7% 14.1% Calendar Year 13

15 Average Indicated Advisory January 1, 2019 Pure Premium Rate $2 Losses Loss Adjustment Expenses $1 $0 $1.70 $1.68 $1.63 $0.46 $0.46 $0.46 $1.24 $1.22 $1.17 WCIRB 1/1/19 Filing (Based on 3/31/18 Experience) WCIRB Based on 6/30/18 Experience Bickmore Projection (Based on 6/30/18 Experience) 14

16 wcirb.com 1221 Broadway, Suite 900 Oakland, CA CA.WCIRB ( ) 2018 Workers Compensation Insurance Rating Bureau of California. All rights reserved.