Regulatory and Legislative Trends Workshop

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2015 Annual Issues Symposium Regulatory and Legislative Trends Workshop Lori Lovgren, JD, CPCU Division Executive State Relations NCCI Ann M. Bok, FCAS, MAAA Practice Leader and Senior Actuary Actuarial & Economic Services Division NCCI

Top Five Reasons Why NCCI Monitors Regulatory/Legislative Changes To understand/explain fluctuations in system costs To serve as a resource to stakeholders To provide cost impact information to stakeholders during the decision-making process To develop filings making any necessary changes to rating plans, rules, and forms To adjust rates/loss costs as necessary to comply with rate standard rates shall be reasonable and not excessive, not inadequate and not unfairly discriminatory 2

Total Relevant Workers Compensation- Related Bills in 1 st Quarter 2015 Relevant Worker Compensation - Related Bills Total 1 Monitored 2 676 Enacted 31 Defeated 3 78 1 These numbers include bills from all states and the District of Columbia that were prefiled or introduced between January 1, 2015 and March 31, 2015, or prefiled or carried over from 2014 2 Includes 2015 pending, defeated, and enacted bills; as well as 2016 draft bills 3 Includes failed, failed-adjourned, or vetoed bills 3

Number of Requests to NCCI for Pricing of Law/Regulation Changes in the Last Five Years 200 175 150 125 100 75 50 25 0 170 138 147 142 120 2010 2011 2012 2013 2014 4

Number of 1 st Quarter Requests to NCCI for Pricing of Law/Regulation Changes in the Last Five Years 120 100 80 83 105 78 79 60 57 40 20 0 2011 2012 2013 2014 2015 5

Top Five Categories of 1 st Quarter 2015 Workers Compensation Proposals First Responders 65 Definition of Employee 37 Occupational Disease 36 Reimbursement/Fee Schedules 33 Indemnity Benefits 32 6

Top Five Items to Know From Actuarial Perspective About NCCI s Pricing Process Objective evaluation of legislative changes Rigorous review process incorporating insights from knowledgeable stakeholders Cost impact may be a point estimate, a range, directional, or indeterminable If enacted, may or may not explicitly include in a filing reflected in emerging experience Retrospective analysis of enacted reforms 7

Top Five 1 st Quarter 2015 Pricings With Greatest Impact New Hampshire SB 3: -14.2% (dead) New Hampshire HB 477: -10.0% (dead) Kentucky HB 206: +6.8% to +9.5% (dead) Arkansas HB 1768: +3.6% to +6.0% (dead) Oregon HB 2764: Over +5.0% (pending) 8

Five Categories of 2015 Workers Compensation Proposals to Watch Drug Formularies Medical Marijuana Fee Schedules Opt Out Attorney Fees 9

Drug Formularies More States Look to Closed Formularies to Lower Workers Comp Costs Business Insurance More States Eye Use of Drug Formularies in Workers Compensation Insurance Journal Drug Formularies Back in the News WorkersCompensation.com Closed Formulary Could Decrease Use of N Drugs Risk & Insurance 10

Drug Formularies CA OR WA NV ID AZ UT MT WY CO NM ND SD NE KS OK MN WI IA MO AR IL MI IN OH KY TN NY PA WV VA NC SC VT NH MA CT ME DC NJ DE MD RI MS AL GA AK TX LA FL HI Drug Formulary in Effect 2015 Drug Formulary Proposals No Drug Formulary 11

Top Five Regulatory/Legislative Facts on Drug Formularies Some states currently have workers compensation drug formularies (some level of control) Studies show formularies produce savings Some states have a form of a drug formulary-a preferred drug list Key to effectiveness of formulary is the degree of control Several states have filed bills/proposed regulations to adopt drug formularies 12

Top Five Pricing Facts on Drug Formularies Historically a directional cost impact Designed to control utilization Evaluating a potential methodology Considerations for determining the cost impact Drugs that require preauthorization represent about 2% of all workers compensation costs 13

Medical Marijuana Legal Marijuana Blurs Workplace Drug Policies Business Insurance Arizona Law Clarified Medical Marijuana Insurance Requirements Insurance Journal Addressing Medical Marijuana in Claims Claims Journal Employers: Legalizing Marijuana Affects Workplace Safety, Hires Journal-News 14

Medical Marijuana CA OR WA NV ID AZ UT MT WY CO NM ND SD NE KS OK MN IA MO AR WI IL MI OH IN KY TN PA WV VA NC SC NY VT NH MA CT ME DC NJ DE MD RI MS AL GA AK TX LA FL HI Legal Medical Use Legal Recreational and Medical Use No laws 2015 Pending Legislation/ Ballot Measures 2015 Failed Initiatives 15

Top Five Regulatory/Legislative Facts on Medical Marijuana 12/17/2014 New law bans Justice Department from using funds to prosecute medical marijuana cases in states where legal 3/10/2015 Federal bill was filed to change classification of marijuana from Schedule I to Schedule II drug Twenty-three states and DC have legalized medical marijuana In 2015, bills were filed in eighteen states to legalize medical marijuana; still pending in nine states; failed in nine states Four states and DC have legalized recreational marijuana 16

Top Five Pricing Facts on Medical Marijuana Not currently priceable No data Some states, including those where medical marijuana has been legalized, taking position that medical marijuana is not reimbursable Unclear impact of medical marijuana on workers compensation costs Consideration impact on drug-free workplace credit 17

Physician/Facility Fee Schedules Medical Fees Shrouded in Mystery insurancenewsnet.com New North Carolina Medical Fees Expected to Save on Work Comp Insurance Journal WC Agency Proposing Changes to Fee Schedule, Health Care Services Rules workcompcentral Higher Doctor Fees May Get Injured Workers Back to Work Faster Business Insurance 18

Physician/Facility Fee Schedules CA OR WA NV ID AZ UT MT WY CO NM ND SD NE KS OK MN IA MO AR WI IL MI OH IN KY TN NY PA WV VA NC SC VT NH MA CT ME NJ DE MD DC RI MS AL GA AK TX LA HI FL 2015 Change Proposals No Activity Proposals to establish new fee schedules or adjust current fee schedules (excluding typical annual updates). 19

Top Five Regulatory/Legislative Facts on Physician/Facility Fee Schedules Most states have physician/facility fee schedules Fee schedule introductions/changes are the most common type of medical cost containment proposal In 2015, Connecticut and North Carolina have added new fee schedules; Alaska is expected later this year Renewed attempts in 2015 to pass fee schedule bills in New Hampshire and Virginia did not succeed Fee schedule bill debates typically center around how to set an appropriate fee for the medical care provided (data and methodology) 20

Top Five Pricing Facts on Physician/Facility Fee Schedules If designed appropriately, fee schedules are an effective tool at containing medical costs Trend toward Medicare-based fee schedules Often significant savings when implemented Reduced annual medical inflation in subsequent years Well-defined pricing methodology utilizing data from NCCI s Medical Data Call 21

Opt Out As Large Companies Opt Out, Concerns Grow for Workers Compensation System New York Times Opt-Out Proposal Gets No Vote from Advisory Panel Workers Compensation Report Opting Out of Texas Workers Comp Doesn t Have to Mean Going Bare Insurance Journal Opt-Out in Workers Compensation Is Not A New Concept WorkersCompensation.com 22

Opt Out WA ME MT ND CA OR NV ID AZ UT WY CO NM SD NE KS OK MN WI IA MO AR IL MI OH IN KY TN NY PA WV VA NC SC VT NH MA CT NJ DE MD DC RI MS AL GA AK TX LA FL HI Mandatory WC Coverage Subject to Statutory Exemptions Opt Out In Effect 2015 Opt Out Proposals 23

Top Five Regulatory/Legislative Facts on Opt Out Two states currently permit opt out TX, OK Models in two states are very different Both opt out states currently have bills filed to change the way opt out works Opt out bills filed in two other states TN and SC New national employer trade association is also pursuing the filing of opt out bills in additional states 24

Top Five Pricing Facts on Opt Out Not currently priceable Which employers will choose this option? How does the loss experience compare? How are the employers distributed across class codes? How will conflicts between provisions be resolved? 25

Attorney Fees Workers Compensation Attorney Fees in the News workcompcentral Court Ponders Attorney Fees in Worker Cases Orlando Sentinel Injured Worker s Law Firm Denied Fee Recoup from Comp Award Business Insurance Florida Supreme Court Weighs Workers Comp Attorney Fee Schedule Insurance Journal 26

Attorney Fees CA OR WA NV ID AZ UT MT WY CO NM ND SD NE KS OK MN WI IA MO AR IL MI OH IN KY TN NY PA WV VA NC SC ME VT NH MA CT NJ DE MD DC RI MS AL GA AK TX LA FL HI 2015 Attorney Fee Proposals No Activity 27

Top Five Regulatory/Legislative Facts on Attorney Fees Several states have bills pending to increase attorney fees Many states have a maximum award; other states limit to a reasonable fee Some argue that if attorney fees are too low, injured workers cannot get representation Others argue that workers compensation is meant to be a self-executing system so a high level of attorney involvement is not required Florida is again the state to watch the Florida Supreme Court will soon decide whether attorney fee caps are constitutional 28

Top Five Pricing Facts on Attorney Fees The type of fee schedule is a key consideration Fees may be based on benefits secured or the total award Are fees paid out of the award or paid by the employer/insurer? May impact claim frequency, average cost of claims, and expenses Moving from a schedule of fees to an uncapped, reasonable fee standard is expected to result in a significant increase 29

Five Categories of Workers Compensation Cases to Watch in 2015 Exclusive Remedy Medical Marijuana Sports Opt Out Independent Contractors 30

Top Five Thoughts to Take Away 2015 legislative season producing second year in a row of relatively low volume of proposals that would impact workers compensation rates, rules, forms Drug formulary is the newest medical cost containment measure Physician/facility fee schedules are the most common medical cost containment measure More states may consider proposals to opt out of the workers compensation system; courts could soon decide whether opt out with exclusive remedy is valid alternative Decisions coming from courts, particularly on exclusive remedy, opt out, and attorney fees, could be game changers 31

2015 Annual Issues Symposium Regulatory and Legislative Trends Workshop (Detailed Slides) Lori Lovgren, JD, CPCU Division Executive State Relations NCCI Ann M. Bok, FCAS, MAAA Practice Leader and Senior Actuary Actuarial & Economic Services Division NCCI

2015 Annual Issues Symposium Premium

Top Five States With Largest Workers Compensation Direct Written Premium Calendar Year 2013 State California New York Texas Illinois Pennsylvania Premium $10.3 Billion $5.2 Billion $2.7 Billion $2.7 Billion $2.6 Billion Private Carrier data compiled from 2013 Annual Statements as reported to NAIC State Fund data compiled from Annual Statements and as published in A. M. Best's Aggregates and Averages Monopolistic states excluded 34

Top Five States With Smallest Workers Compensation Direct Written Premium Calendar Year 2013 State District of Columbia South Dakota Vermont Delaware Rhode Island Premium $163 Million $172 Million $175 Million $178 Million $184 Million Private Carrier data compiled from 2013 Annual Statements as reported to NAIC State Fund data compiled from Annual Statements and as published in A. M. Best's Aggregates and Averages Monopolistic states excluded 35

Top Five States With the Largest Five Year Increase in Direct Written Premium State CY 2008 CY 2013 5 Year Change (%) New York $3.5 Billion $5.2 Billion 48.3% California $7.6 Billion $10.3 Billion 34.7% Oklahoma $750 Million $972 Million 29.7% Iowa $564 Million $725 Million 28.6% South Dakota $138 Million $172 Million 24.9% Private Carrier data compiled from 2013 Annual Statements as reported to NAIC State Fund data compiled from Annual Statements and as published in A. M. Best's Aggregates and Averages Monopolistic states excluded 36

Top Five States With the Largest Five Year Decrease in Direct Written Premium State CY 2008 CY 2013 5 Year Change (%) West Virginia $486 Million $337 Million -30.5% Nevada $431 Million $309 Million -28.2% Montana $356 Million $276 Million -22.6% Kentucky $593 Million $491 Million -17.3% Alabama $368 Million $313 Million -15.1% Private Carrier data compiled from 2013 Annual Statements as reported to NAIC State Fund data compiled from Annual Statements and as published in A. M. Best's Aggregates and Averages Monopolistic states excluded 37

2015 Annual Issues Symposium Results

Top Five NCCI States With Highest Combined Ratios Accident Year 2013 State Combined Ratio Oregon 132 Maine 122 Maryland 116 Rhode Island 113 Colorado 113 39

Top Five NCCI States With Lowest Combined Ratios Accident Year 2013 State Combined Ratio West Virginia 84 Texas 85 Oklahoma 89 Arkansas 89 Alaska 90 40

Top Five Most Stable States Based on Rankings From the 2004 and 2014 Oregon Workers Compensation Premium Rate Ranking Studies 60 50 50 51 51 50 40 30 2004 Rank 20 10 0 1 1 California 12 12 13 13 New Hampshire Maine Indiana North Dakota 2014 Rank Rank is based on descending rates, i.e., the state with the highest average rate would be Rank 1 41

Top Five Most Stable States Based on Rates From the 2004 and 2014 Oregon Workers Compensation Premium Rate Ranking Studies $3.50 $3.00 $2.50 $2.00 $1.50 $1.91 $1.88 $2.08 $2.00 $1.49 $1.60 $2.97 $2.75 $2.20 $2.00 2004 Rate 2014 Rate $1.00 $0.50 $0.00 Iowa South Carolina Arizona New York Washington 42

Top Five States With the Largest Ranking Increase From the 2004 and 2014 Oregon Workers Compensation Premium Rate Ranking Studies 50 40 30 20 10 0 29 3 New Jersey 39 17 South Carolina 34 14 43 24 35 17 Idaho Iowa Washington Rank is based on descending rates, i.e., the state with the highest average rate would be Rank 1 2004 Rank 2014 Rank 43

Top Five States With the Largest Ranking Decrease From the 2004 and 2014 Oregon Workers Compensation Premium Rate Ranking Studies 50 40 30 45 40 33 28 27 20 10 0 10 District of Columbia 6 5 3 4 Kentucky Ohio Florida Hawaii 2004 Rank 2014 Rank Rank is based on descending rates, i.e., the state with the highest average rate would be Rank 1 44

2015 Annual Issues Symposium Rate Filings

Top Five NCCI States With Largest Approved Voluntary Increases 2014-2015 Rate Filing Season* State Voluntary Change District of Columbia 6.8% Maine 2.6% New Mexico 2.3% Hawaii 2.0% South Carolina** 1.9% *Filings with effective dates between 10/1/2014 and 9/1/2015 **Pending 46

Top Five NCCI States With Largest Approved Voluntary Decreases 2014-2015 Rate Filing Season* State Voluntary Change Texas -10.9% Kansas -10.4% West Virginia -9.1% South Dakota -8.9% Tennessee -8.2% *Filings with effective dates between 10/1/2014 and 9/1/2015 47

Top Five States With Highest Average Loss Costs by Industry Group All Classes Manufacturing Contracting Office & Clerical Good & Services Miscellaneous MT 2.25 IL 3.23 CT 7.34 AK 0.58 AK 2.97 CT 6.54 AK 2.04 MT 3.22 IL 6.50 MT 0.48 CT 2.80 VT 5.65 OK 1.72 CT 3.00 MT 5.81 NM 0.41 MT 2.75 IL 5.61 VT 1.62 IA 2.96 NH 5.39 NV 0.40 OK 2.46 IA 4.93 NM 1.61 AK 2.95 VT 5.24 OK 0.37 VT 2.46 NC 4.92 Based on the latest NCCI approved rates and loss costs 48

Top Five States With Lowest Average Loss Costs by Industry Group All Classes Manufacturing Contracting Office & Clerical Good & Services Miscellaneous DC 0.35 AR 1.15 TX 2.07 DC 0.11 AR 0.96 TX 1.82 TX 0.58 UT 1.25 IN 2.19 TX 0.12 TX 1.06 DC 1.98 VA 0.70 IN 1.27 AR 2.32 VA 0.13 DC 1.14 AR 2.20 AR 0.76 TX 1.30 HI 2.72 AR 0.14 UT 1.17 UT 2.21 IN 0.83 AZ 1.46 WV 2.92 UT 0.15 IN 1.24 IN 2.48 Based on the latest NCCI approved rates and loss costs 49

Top Five States With Highest Average Payroll Distribution by Industry Group Manufacturing Contracting Office & Clerical Goods & Services Miscellaneous IN 16.8% LA 12.9% DC 84.8% NV 38.0% OR 10.9% SC 16.3% NM 12.3% CT 69.9% HI 34.9% AK 10.3% AR 16.2% OK 11.2% VA 69.4% MT 30.4% MT 9.0% AL 15.5% AK 10.7% MD 68.0% NM 25.4% KY 8.9% KY 14.6% MT 10.1% IL 66.3% ME 24.9% WV 8.8% Based on the latest NCCI approved rates and loss costs 50

Top Five States With Lowest Average Payroll Distribution by Industry Group Manufacturing Contracting Office & Clerical Goods & Services Miscellaneous DC 0.2% DC 3.1% NV 41.1% DC 9.8% DC 2.2% AK 2.7% CT 3.5% MT 44.9% TX 11.7% CT 3.0% HI 2.9% NH 3.8% HI 45.6% VA 16.3% NH 3.3% MD 4.2% KY 4.0% MS 47.7% CT 16.5% VA 3.6% FL 4.5% GA 4.3% NM 48.3% IL 16.6% RI 4.0% Based on the latest NCCI approved rates and loss costs 51

Top Five Class Codes With the Highest Average Loss Cost/Rate Change Countrywide Class Code Latest Change 7600 - TELECOMMUNICATIONS CO. - CABLE TV OR SATELLITE - ALL OTHER EMPLOYEES & DRIVERS 6.2% 8855 - BANKS AND TRUST COMPANIES - ALL EMPLOYEES, SALESPERSONS, DRIVERS & CLERICAL 3.5% 7405 - AVIATION: AIR CARRIER - SCHEDULED, COMMUTER OR SUPPLEMENTAL - FLYING CREW 2.4% 8869 - CHILD CARE CENTER - ALL EMPLOYEES INCLUDING CLERICAL, SALESPERSONS & DRIVERS 0.2% 9015 - BUILDING OR PROPERTY MANAGEMENT - ALL OTHER EMPLOYEES -1.1% Based on the latest approved loss costs and rates for the 50 class codes with the highest aggregate payroll countrywide 52

Top Five Class Codes With the Lowest Average Loss Cost/Rate Change Countrywide Class Code Latest Change 8603 - ARCHITECTURAL OR ENGINEERING FIRM - CLERICAL -21.8% 8601 - ARCHITECTURAL OR ENGINEERING FIRM - INCLUDING SALESPERSONS & DRIVERS -9.5% 4511 - ANALYTICAL LABORATORIES OR ASSAYING - INCLUDING LABORATORY, OUTSIDE EMPLOYEES, COLLECTORS OF SAMPLES, & DRIVERS -9.4% 8723 - INSURANCE COMPANIES - INCLUDING CLERICAL & SALESPERSONS -9.1% 3681 - TELEVISION, RADIO, TELEPHONE OR TELECOMMUNICATION DEVICE MFG NOC -7.8% Based on the latest approved loss costs and rates for the 50 class codes with the highest aggregate payroll countrywide 53

Top Five States With Smallest Cumulative Claim Frequency Decrease Lost-Time Claims State 10 Policy Year Frequency Change Georgia -1% Oregon -6% South Dakota -9% North Carolina -10% Arizona -11% Based on data through 12/31/2013, developed to ultimate; equal to the policy year 2012 frequency divided by the policy year 2003 frequency for the 37 NCCI states with available data 54

Top Five States With Largest Cumulative Claim Frequency Decrease Lost-Time Claims State 10 Policy Year Frequency Change Texas -39% Missouri -37% Kentucky -37% Vermont -35% Louisiana, Oklahoma -34% Based on data through 12/31/2013, developed to ultimate; equal to the policy year 2012 frequency divided by the policy year 2003 frequency for the 37 NCCI states with available data 55

Top Five NCCI States With Largest Policyholder Dividends Percentages Calendar Year 2013 State Policyholder Dividend Maine 7.8% Iowa 3.0% Florida 2.7% Nebraska 1.7% Idaho 1.6% Calculated by NCCI from NAIC Annual Statement page 14 data Based on private carrier data only 56

2015 Annual Issues Symposium Indemnity/Medical

NCCI States With Top Five Highest Approved Indemnity Loss Ratio Trend 2014-2015 Rate Filing Season* State Indemnity Trend IA 0.0% CT, IN, NH -0.5% GA, LA, NC -1.0% DC, MD, MI, OR VT -1.5% FL, ME, NE, SC** -2.0% *Filings with effective dates between 10/1/2014 and 9/1/2015 **Pending 58

NCCI States With Top Five Lowest Approved Indemnity Loss Ratio Trend 2014-2015 Rate Filing Season* State Indemnity Trend WV -5.5% AK, AR, KY -5.0% AZ -4.5% CO, HI, ID -4.0% TN, UT -3.5% *Filings with effective dates between 10/1/2014 and 9/1/2015 59

NCCI States With Top Five Highest Approved Medical Loss Ratio Trend 2014-2015 Rate Filing Season* State Medical Trend IA 2.0% CT, IN, NH 1.5% LA 1.0% AZ, ID, MO, OR 0.5% AK, CO, FL, HI, IL, MT, NE, NC, SD, TN, WV 0.0% *Filings with effective dates between 10/1/2014 and 9/1/2015 60

NCCI States With Top Five Lowest Approved Medical Loss Ratio Trend 2014-2015 Rate Filing Season* State Medical Trend TX -3.5% KY -3.0% AL, DC, ME -1.5% AR, MS, NV, OK, SC**, UT -1.0% GA, KS, MD, NM, VT -0.5% *Filings with effective dates between 10/1/2014 and 9/1/2015 **Pending 61

Top Five NCCI States With Highest Lost-Time Indemnity Severity Policy Year 2012 2014-2015 Rate Filing Season* State Indemnity Average Lost-Time Claim Severity District Of Columbia 40,185 Louisiana 38,647 North Carolina 35,826 Connecticut 31,972 South Carolina 31,956 Source: NCCI financial data evaluated as of 12/31/2013 *Filings with effective dates between 10/1/2014 and 9/1/2015 62

Top Five NCCI States With Lowest Lost-Time Indemnity Severity Policy Year 2012 2014-2015 Rate Filing Season* State Indemnity Average Lost-Time Claim Severity Utah 12,204 Indiana 12,634 Oregon 13,455 South Dakota 13,700 New Hampshire 14,456 Source: NCCI financial data evaluated as of 12/31/2013 *Filings with effective dates between 10/1/2014 and 9/1/2015 63

Top Five NCCI States With Highest Lost-Time Medical Severity Policy Year 2012 2014-2015 Rate Filing Season* State Medical Average Lost-Time Claim Severity Alaska 54,146 Virginia 48,973 Louisiana 47,964 New Mexico 46,749 Alabama 44,536 Source: NCCI financial data evaluated as of 12/31/2013 *Filings with effective dates between 10/1/2014 and 9/1/2015 64

Top Five NCCI States With Lowest Lost-Time Medical Severity Policy Year 2012 2014-2015 Rate Filing Season* State Medical Average Lost-Time Claim Severity Hawaii 13,113 Oregon 17,354 Texas 26,115 Missouri 26,798 District of Columbia 26,962 Source: NCCI financial data evaluated as of 12/31/2013 *Filings with effective dates between 10/1/2014 and 9/1/2015 65

Top Five NCCI States With Largest Indemnity Percentage of Benefits Based on the 2014-2015 Rate Filing Season* State Indemnity Percentage Rhode Island** 65% District of Columbia 62% Hawaii 52% South Carolina 52% Illinois 51% *Filings with effective dates between 10/1/2014 and 9/1/2015 **Based on 8/1/2014 filing 66

Top Five NCCI States With Largest Medical Percentage of Benefits Based on the 2014-2015 Rate Filing Season* State Medical Percentage Alaska 76% Utah 76% Indiana 75% Arizona 75% New Hampshire 73% *Filings with effective dates between 10/1/2014 and 9/1/2015 67

Top Five NCCI States With Biggest Shifts in Indemnity/Medical Splits Based on the 2013-2014* and 2014-2015** Rate Filing Seasons* State Indemnity/Medical Last Season Indemnity/Medical Current Season Oklahoma 53% / 47% 46% / 54% Tennessee 36% / 64% 31% / 69% Missouri 37% / 63% 42% / 58% Kansas 38% / 62% 35% / 65% Maine 45% / 55% 48% / 52% *Filings with effective dates between 10/1/2013 and 9/1/2014 **Filings with effective dates between 10/1/2014 and 9/1/2015 68

2015 Annual Issues Symposium Residual Markets

Top Five Largest Residual Market States By Policy Count Among 21 States Where NCCI Is Plan Administrator Residual Market Annual 2014 State Activity Reports 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 30,789 18,223 15,128 13,345 11,085 Illinois Georgia Virginia Connecticut South Carolina Annual Data for Policies Reported through December 31, 2014 Total number of all Assigned Risk Plan policies with effective dates during 2014 70

Top Five Smallest Residual Market States By Policy Count Among 21 States Where NCCI Is Plan Administrator Residual Market Annual 2014 State Activity Reports 3,000 2,500 2,466 2,000 1,764 1,676 1,500 1,310 1,000 500 0 West Virginia South Dakota Alabama Annual Data for Policies Reported through December 31, 2014 Total number of all Assigned Risk Plan policies with effective dates during 2014 District of Columbia 591 Idaho 71

Top Five Largest Residual Market States By Premium Among 21 States Where NCCI Is Plan Administrator Residual Market Annual 2014 State Activity Reports Illinois Virginia Georgia Connecticut Arizona State Premium $120 Million $62 Million $60 Million $55 Million $52 Million Annual Data Reported through December 31, 2014 Total amount of all Assigned Risk Plan premium with effective dates during 2014 72

Top Five Smallest Residual Market States By Premium Among 21 States Where NCCI Is Plan Administrator Residual Market Annual 2014 State Activity Reports State Idaho District of Columbia South Dakota Alabama New Mexico Premium $2 Million $9 Million $11 Million $12 Million $17 Million Annual Data Reported through December 31, 2014 Total amount of all Assigned Risk Plan premium with effective dates during 2014 73

Top Five States With Largest Assigned Risk Market Share As a Percentage of Premiums Written 2004 2009 2014* Kansas 20.7% Alaska 11.9% Alaska 15.8% Alaska 20.2% Kansas 8.4% Vermont 11.0% New Hampshire 16.9% New Hampshire 5.9% New Hampshire 10.9% Vermont 16.8% Vermont 5.7% Arkansas 10.4% Virginia 15.5% Virginia 5.3% Kansas 10.4% Only NCCI managed residual markets are reflected *Preliminary 74

Top Five States With Smallest Assigned Risk Market Share As a Percentage of Premiums Written 2004 2009 2014* Arizona 0.9% Idaho 0.7% Idaho 0.6% Idaho 1.4% Arizona 0.7% Alabama 4.5% Alabama 8.3% West Virginia 0.8% Illinois 5.1% Oregon 8.5% Alabama 2.6% South Carolina 5.8% Georgia 8.7% Illinois 2.7% West Virginia 6.0% Only NCCI managed residual markets are reflected *Preliminary 75

Top Five States With Largest Average Residual Market Policy Size Among 21 States Where NCCI Is Plan Administrator Residual Market Annual 2014 State Activity Reports Average Policy Size $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 $7,145 $7,195 $7,498 District of Columbia $9,458 $10,313 West Virginia Mississippi Iowa Arizona Annual Data Reported through December 31, 2014 Based on premium for policies with effective dates during 2014 76

Top Five States With Smallest Average Residual Market Policy Size Among 21 States Where NCCI Is Plan Administrator Residual Market Annual 2014 State Activity Reports $6,000 Average Policy Size $4,000 $2,626 $3,007 $3,272 $3,742 $3,900 $2,000 $0 Idaho South Carolina Georgia Arkansas Illinois Annual Data Reported through December 31, 2014 Based on premium for policies with effective dates during 2014 77

Top Five Class Codes in Residual Market By Policy Count Among 21 States Where NCCI Is Plan Administrator Policy Year 2014 Class Code Percentage by Policy Count 5645-Carpentry Construction 8.2% 5437-Carpentry Installation 5.0% 5474-Painting 4.5% 7228-Trucking, Local 4.1% 5551-Roofing 2.8% Annual Data Reported through December 31, 2014 The top governing class codes for policies issued during 2014 78

Last Five Years of Voluntary Coverage Assistance Program Results (NCCI s VCAP Service) $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Average Savings per Application $1,635 $1,593 $1,297 $1,350 $1,148 2010 2011 2012 2013 2014 79

Top Five States Voluntary Coverage Assistance Program Results (NCCI s VCAP Service) $1,600,000 $1,400,000 2010-2014 Cumulative Savings $1,475,741 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $382,445 $661,258 $563,947 $445,391 $200,000 $0 AZ GA IL OR SC 80

Questions Contact Information: Email: lori_lovgren@ncci.com Phone:561-893-3337 Email: ann_bok@ncci.com Phone: 561-893-3098