Basics of Financial Call Data Reporting Requirements Presented by: Ferne Friedberg and Brian Barnett 1 Objective Provide a basic understanding of Financial Call data, including the reporting requirements, recommended workflow, and Aggregate Data Quality Incentive Program (ADQIP). 2 1
Agenda Collection and Use of Financial Call Data Resources and Tools Premium Categories General Reporting Requirements Financial Data Calls Financial Call Components Calls 8, 31, and 10 Recommended Workflow Aggregate Data Quality Incentive Program (ADQIP) 3 Collection and Use 4 2
What Is Financial Data? Calendar Year Policy Year Calendar- Accident Year Aggregated (Summarized) 5 What Does NCCI Collect? 22 Aggregate Financial Calls Categorized and Grouped Primary Ratemaking Calls Supplemental Ratemaking Calls Premium-Based Billing and Residual Market Calls State-Specific Calls Compliance Forms 6 3
How Is Financial Data Used? At the state level NCCI uses this data for ratemaking purposes Also supports: Overall market analysis and research Response to state regulatory requirements 7 Resources and Tools 8 4
Data Reporting Tab 9 Financial Call Season Web Article 10 5
How Is Financial Data Reported? Financial Data Collection tool: 21 of the 22 Calls are reported electronically 1 hard copy Call Create Copy Import Validate Submit ncci.com Notifications 11 How Is Financial Data Reported? 12 6
Guidebook Reference Financial Call Reporting Guidebook Reference 13 Financial Call Reporting Guidebook The Financial Call Reporting Guidebook is your primary reference for instructions on completing your Financial Calls accurately. ncci.com 14 7
Financial Call Reporting Guidebook 1 Guidebook Overview 15 Financial Call Reporting Guidebook 4 16 8
Financial Call Reporting Guidebook 99 17 Resources and Tools To support Financial Call reporting: Financial Call Reporting Guidebook Edit Matrix Data Quality Web page Financial Call season Web article with links to related circulars Financial Data Collection tool Financial data validator as assigned Webinars on Demand Data Educational Program materials 18 9
Premium Categories 19 Premium Categories 5 Loss Costs Rates Combined Relativities 20 10
Category Loss Costs 5 Loss cost states (also called competitive pricing states): Publish loss costs (also known as pure premiums) to cover indemnity (lost wages) and medical benefits Generally, loss costs do not cover expenses; carriers file a loss cost multiplier (LCM) 21 31 loss cost states: Loss Cost States 5 Alabama Alaska Arkansas Colorado Connecticut District of Columbia Georgia Hawaii Kansas Kentucky Louisiana Maine Maryland Mississippi Missouri Montana Nebraska Nevada New Hampshire New Mexico North Carolina Oklahoma Oregon Rhode Island South Carolina South Dakota Tennessee Utah Vermont Virginia West Virginia 22 11
Category Rates 5 Rate states (also called administered pricing states): Arizona Florida Idaho Iowa Publish full rates to cover all indemnity (lost wages) and medical benefits, as well as expenses Rate deviations to be filed/approved 23 Category Rates and Loss Costs Combined states: 5 Illinois Indiana Publish both rates and loss costs, but the carrier decides which to use as the basis for its company rates 24 12
Category Relativities Texas 5 Texas Department of Insurance Relativities Publishes relativities, which are a set of indices between classes NCCI State-Approved Loss Costs Carriers have the option to use the loss costs 25 Premium Categories All States WA MT OR ID WY NV UT CO CA AZ NM ND MN VT ME SD WI NH NE IA MI NY MA IL RI IN OH PA CT KS MO WV NJ KY VA DE OK TN DC AR NC MD MS SC TX LA AL GA AK HI FL NCCI Loss Cost NCCI Combined Loss Cost/Rates NCCI Rates NCCI Loss Cost/Rate Relativities Independent Bureaus Monopolistic 26 13
Review How does NCCI use the financial data that is reported? What are the four premium categories/pricing mechanisms? What two states are combined states? Which of the following covers both losses and expenses loss costs or rates? 27 General Reporting Requirements 28 14
Financial Calls 4 Calls are reported on a carrier group level Group Company Company Company Exception: Texas reported at company level 29 General Experience Types s 6 and 9 Inclusions All workers compensation experience unless noted as an exclusion Exclusions Experience you would generally exclude from the ratemaking Calls 30 15
Excluded Experience s 6 and 9 Exclusions for ratemaking Calls: Underground coal mine classifications (including disease codes, e.g., black lung) For Virginia, also exclude surface coal mine Excess workers compensation policies Federal classifications however: Include any USL&HW experience associated with industrial classifications Maritime and other Federal Employer Liability Act (FELA) classifications for policies effective 1/1/03 and subsequent 31 Excluded Experience s 6 and 9 More exclusions for ratemaking Calls: National Defense Projects Rating Plan Reinsurance Assumed Catastrophe and Terrorism Provision Premium (Statistical Codes 9740, 9741, or 9752) Large Deductible Policies Except for Calls 20, 21, and 31 where large deductible experience is reported for Florida 32 16
Excluded Experience Guidebook Example 6 33 Financial Call Data Collected Data Valued as of 12/31 29 Policy Years 28 Calendar- Accident Years Summary Row for All Prior Years Continued Expansion of Specific Ratemaking Calls 34 17
Policy Year: 29 Years Calendar- Accident Year: 28 Years 35 Policy Year Financial Call Types 4 Premiums and losses for all policies with effective dates within that year Example: Policies with effective dates January 1 to December 31, 2014: Premium earned for those policies For all claims that develop for these policies, report under Policy Year 2014 36 18
Policy Year Example Calendar- Accident Year 2013 Calendar- Accident Year 2014 5/1/14 Accident Date Policy Year 2012 Policy Year 2013 Policy Year 2014 6/30/14 Policy Expiration Date 7/1/13 Policy Effective Date For data valued as of 12/31/14: Report premiums to which policy year? Report losses from 5/1/14 accident to which policy year? 37 Financial Call Types 4 Calendar-Accident Year Premiums earned within a calendar year and losses with accident dates occurring in that calendar year Example: For Calendar-Accident Year 2014, include: Premium earned during 2014 Claims with accident dates occurring in 2014 38 19
Calendar-Accident Year Example Premium Losses 7/1/13 6/30/14 Policy Effective Date 7/1/13 6/30/14 Policy Effective Date Calendar- Accident Year 2013 Calendar- Accident Year 2014 Calendar- Accident Year 2013 Calendar- Accident Year 2014 For data valued as of 12/31/14: Report premium transactions to CY: Report the 10/1/13 claim to AY: 10/1/13 Accident Date 39 Why Both Types of Calls? Verify the consistency of the data: Policy year vs. calendar-accident year the way the data is arranged and summarized Calendar year totals should reconcile between the policy year and calendar-accident year Calls Both Call types: historical data on earned premium, losses, claim counts, and expenses Used for analysis: loss ratios and emerging claim patterns/trends 40 20
Financial Call Market Types Voluntary Assigned Risk Statewide Voluntary Market Pertains to insureds that (are able to) obtain coverage through insurance companies Assigned Risk Market Pertains to insureds that cannot acquire insurance in the voluntary market and must obtain coverage through a state-assigned risk plan or pool 41 Financial Data Calls 42 21
Primary Ratemaking Calls 3 Policy Year 4 Policy Year Calls 3A Policy Year Assigned Risk 20 Policy Year Large Deductible (FL only) 32A Virginia Coal Mine Policy Year Assigned Risk 32V Virginia Coal Mine Policy Year Voluntary 43 Primary Ratemaking Calls 4 5 Calendar-Accident Year Calendar- Accident Year Calls 5A Calendar-Accident Year Assigned Risk 21 Calendar-Accident Year Large Deductible (FL Only) 44 22
Primary Ratemaking Calls 4 8 Reconciliation Report 31 Large Loss and Catastrophe Call 33 VA Coal Mine Large Loss and Catastrophe Call 45 Supplemental Ratemaking Calls 4 6 Insurance Expense Exhibit (IEE) 10 Schedule Rating and Other Prospective Premium Adjustments 19 Accident Year Countrywide Loss Adjustment Expense 46 23
Premium-Based and Residual Market Calls 4 1 Calendar Year Call for Workers Compensation Net Direct Written Premium 1A Calendar Year Call for Direct Assignment Net Direct Written Premium 1B Calendar Year Alternate Equivalent Premium 1C Calendar Year Kansas Municipalities Premium Exclusion 1D Calendar Year New Mexico Small Policy Exemption 47 State-Specific Calls 4 10T TX Policy Year Call for Schedule Rating Modifications 14 Calendar Year Expense (AZ, NC, and VA) 26 NC Addendums for Calls 3, 5, and 19 48 24
Compliance Forms 11 Self-Audit Form Acknowledgment Form 49 Call Reporting Requirements 4 50 25
Call Reporting Requirements 4 You are required to report Call 3 if you wrote workers compensation policies in a given state in 1986 and/or any subsequent years. 51 What Do You Need to Report? 9 52 26
Call Due Dates 2 * = Submitted hard copy ** = Subject to timeliness only in ADQIP 53 Review Time! 54 27
Review What are the two compliance forms collected? True or False: Excess workers compensation policy experience is included in Call 3 Policy Year True or False: All Calls are due April 1 Statewide data = and 55 Financial Call Components 5 56 28
Reporting Requirements 5 Report to the state of exposure Report on a direct basis Valued as of December 31 57 Call Components Premiums Losses Claim Counts Expenses 58 29
Premiums s 5 and 7 59 Earned Premium Types 5 Designated Statistical Reporting (DSR) Level Company Standard Level Net 60 30
DSR Level Premium s 5 and 7 As though business was written at NCCI-filed and state-approved loss cost or rate levels Includes NCCI s experience rating modifications Benchmark level premium Used by NCCI for ratemaking 61 Company Standard Premium At company rates 5 Includes NCCI s experience rating modifications Prior to the application of risk-specific adjustments Helps in verifying the accuracy of DSR premium 62 31
Net Premium 5 After the application of all adjustments Includes NCCI s experience rating modifications Should reconcile to earned premium reported on National Association of Insurance Commissioners (NAIC) Annual Statement (state page data) 63 Financial Call Premium Call 3 Call 5 64 32
Calculating DSR Level Premium Two approaches: 7 Extending exposures Deriving DSR level premium from company standard premium 65 DSR Level Premium Other Considerations Combined Rate and Loss Cost States Illinois and Indiana DSR level is rates Relativity State Texas DSR level is relativities or loss costs 7 66 33
Premium Components Summary 5 67 Active Deviation The effective date of your filed LCM/deviation from rates The effective date of NCCI s rate or loss cost filing The filed LCM/deviation minus 1.000 (1.230 1.000) A rolling multiplier (Y) indicates that you automatically adopt NCCI s rate or loss cost filing on the date it is effective 68 34
Losses 5 69 Reporting Losses 5 Indemnity Replacement of lost wages Medical Medical care related to on-the-job injury 70 35
Paid Losses and Case Reserves Include losses from medical-only claims on the Calls Paid Monies paid by insurance company for claims Case Monies set aside for future payments on specific claims 71 Reporting Losses Other Items 5 Subrogation Employers Liability ( II) Coverage Independent Medical Exam Deductible Reimbursements Lump-Sum Settlements 72 36
Reporting Losses Other Items Subrogation A type of loss recovery for a carrier where losses paid are recovered from a third party Paid losses reduced for actual subrogation amount Case reserves can be offset by anticipated subrogation recoveries 5 73 Reporting Losses Other Items Losses Employers Liability ( II) Coverage Defense and Cost Containment Expense (DCCE) associated with employers liability ( II) coverage should be included with indemnity losses and not reported as a loss adjustment expense. 74 37
Reporting Losses Other Items Independent Medical Examination If required by an industrial board or commission, report as a medical loss If not required by an industrial board or commission, report as DCCE 75 Reporting Losses Other Items Deductible Reimbursements Reported on a gross basis, except in Kentucky, which is net Lump-Sum Settlements Allocate accordingly to indemnity and medical 76 38
Call 3 Paid Losses and Case Outstanding 77 Claim Counts 5 78 39
Call 3 Indemnity Claim Counts Incurred Incurred Indemnity Indemnity Claim Claim Count (8) Count (8) 5 Indemnity payment of at least $1 or Outstanding indemnity reserve of at least $1 79 Claim Count Reporting Include Claim could have both indemnity and medical losses 5 Indemnity claims that are open, closed, or reopened Indemnity claims for Policy Year 1993 and subsequent for all states* *Texas exception Policy Year 2007 and subsequent Copyright 2013 National Council on Compensation Insurance, Inc. All Rights Reserved. 80 40
Claim Count Reporting Exclude 5 Medical-only claims Claims closed with no payment Defense and Cost Containment Expense (DCCE)-only claims Copyright 2013 National Council on Compensation Insurance, Inc. All Rights Reserved. 81 Call 3 Closed Claim Counts 5 Accumulated Closed (Paid) (9) An indemnity claim paid in full with no reserves A claim closed on the prior valuation, but reopened as of the current valuation, must be removed from Column 9 82 41
Call 3 Open Claim Counts 5 Open (Outstanding) (10) Indemnity claims with outstanding case or Defense and Cost Containment Expense (DCCE) reserves Closed claims (Column 9) + open claims (Column 10) = incurred claims (Column 8) 83 Claim Count At all times: Closed Claims Open Claims Incurred Claims 84 42
Expenses 5 85 Expenses Defense and Cost Containment Expenses (DCCE) Loss adjustment expenses for: Defense by the coverage provider (whether a first-party or third-party claim) for litigation involving a claim Cost containment 5 86 43
DCCE Expenses Examples: Surveillance Litigation management Fixed amounts for cost containment Fees or salaries for appraisers, private investigators, hearing representatives, reinspectors, and fraud investigators only if working in defense of a claim Attorney fees (to defend) 5 Exclude Adjusting and Other Expenses (AOE), such as fees of adjusters/settling agents (but not if a contentious defense) and attorney fees used in determining coverage 87 DCCE Expenses 5 Report DCCE paid and case For all states except Texas, required reporting for PY 1994 and subsequent Texas required for PY 2006 and subsequent Call 3 Accumulated Paid (11) Case Outstanding (12) 88 44
Calls 8, 31, and 10 9 89 Call 8 Reconciliation Report 9 Reconciles the calendar year data reported to NCCI with the data reported on the carrier s NAIC Annual Statement, Statutory Page 14 Consists of calendar year direct premiums earned, direct losses (paid and incurred), and Direct Defense Cost and Containment Expenses (DCCE) paid 90 45
Call 8 Reconciliation Report Call 8 Line (1) comes directly from Calendar- Accident Year Call 5: Call 5 Call 8 91 Call 8 Other Reconciliation Items Excluded from NCCI Financial Call 5: 9 Federal (F)-Classifications Maritime and Other FELA Classifications Underground Coal Mine Classifications National Defense Projects Large Deductible Experience 92 46
Call 8 Reconciliation Items Excluded from NCCI Financial Call 5: 9 Small deductibles losses and expenses only (difference between gross and net, except KY [a subtraction item]) Excess policies Loss assessments (those excluded from losses reported to NCCI) Catastrophe premium (i.e., TRIA and DTEC) 93 Call 8 Reasons for Difference Possible Reasons for Difference: Grouping differences affiliates list Earned But Unbilled Premium (EBUB) not reported in the policy year or calendaraccident year Calls Reasons for Difference are addressed on lines 15 18 Note: Reasons for Difference explanation is not necessary if the difference is between: +/ $5,000 for Premiums/Losses +/ $50,000 DCCE 9 94 47
Call 8 Example 95 Call 31 Large Loss and Catastrophe Call 9 Provides the necessary claim detail to treat large losses and Extraordinary Loss Event (ELE) catastrophes in aggregate ratemaking at the state level Includes all claims for Accident Year 1984 and later, where total incurred losses are equal to or greater than $500,000 at the time of valuation; excludes DCCE payments and reserves Open, closed, or reopened claim status 96 48
Call 31 Large Loss and Catastrophe Call 9 Includes ELE claims that are assigned unique catastrophe numbers: Call 31 includes Catastrophe Numbers 14, 28, 48, 77, 87, and 93 Do not report ELE or large loss claims when part of a large deductible policy Exception: Florida 97 Call 31 Large Loss and Catastrophe Call 9 A separate submission is required for each state Texas does not report this Call Subset of Calls 3, 3A, 5, 5A, 20, and 21 Report on a consistent basis with the policy year and calendar-accident year Calls 98 49
Call 31 Example The three market types reported within this Call are: 0 Assigned risk (other than large deductible) 2 Large deductible (Florida only) 3 Voluntary (other than large deductible) Claim status is reported as one of the following: 0 Open 1 Closed 2 Re-Opened 9 99 Call 10 Schedule Rating and Other Prospective Premium Adjustments Call Call 10 Policy year accumulated earned schedule rating adjustment for the most current five years Report adjustments at a company rate level 9 100 50
Review Time! 101 Review Name the three premium levels reported in the Financial Calls. Also which one is used in the filing? 3 On what basis should losses be reported gross or net? What is the purpose of Call 8? What amount of incurred losses constitutes a large loss? Should closed claims for large losses be reported on Call 31 for subsequent valuations? 102 51
Recommended Workflow 3 103 Workflow Steps Review/Update Deviation Information Create Calls and Self-Audit Form Preform Initial Validation Address Edit Log Revalidate Calls Submit Calls Submit Self-Audit Form Submit Acknowledgment Form 3 104 52
Workflow Benefits 3 The recommended workflow assists you in reporting your data in two ways: Accuracy Efficiency 105 Workflow Flowchart 3 106 53
Active Deviation Review Review and Update Deviation/ Loss Cost Multiplier Information Essential for DSR level premium accuracy Financial data validator must make entries for prior policy years 107 Active Deviation Example Update Active Deviation Loss Cost Multiplier = 1.690 108 54
Call Creation 3 Create Financial Calls and Self-Audit Form 109 Call Creation Example 110 55
Call Validation 3 Validate Financial Call data 111 Call Validation 3 Edit Matrix Sample Edit 112 56
Call Validation Example 113 Review Edit Log Edit Review Are there edits? YES Correct Call data or provide explanations 3 NO 114 57
Edit Review Edit Log within Financial Data Collection Financial Call Edit Matrix, 10 of the Financial Call Reporting Guidebook 115 Edit Resolution/Explanation Resolve Presubmission Edits Correct data and/or Provide acceptable explanations to (critical to Aggregate Data Quality Incentive Program): Confirm data is correct Include specific details and amounts Address all edit components Revalidate 116 58
Call Submission Submit Financial Call data 3 117 Compliance Forms Submit completed Self-Audit Form via Financial Data Collection Fax Acknowledgment Form with original submission 11 118 59
Self-Audit Form 1 Self-Audit Form is submitted within Financial Data Collection on an annual basis One form required per carrier group (countrywide) Confirmed Review Does Not Apply Qualified Review 11 119 Self-Audit Form 2 120 60
Acknowledgment Form Last step is submitting the Acknowledgment Form Hard copy only (primarily submitted via fax) and receipt date keyed in by NCCI Only a company officer, accredited actuary, or outside consultant can sign the form Applicable for all ratemaking Calls that are due April 1 Submit before or on April 1 but after all ratemaking Calls due April 1 121 Acknowledgment Form Example 11 122 61
Review Workflow Flowchart Yes Or No 123 Aggregate Data Quality Incentive Program (ADQIP) 11 124 62
ADQIP 11 Provides incentive to submit data in a timely and accurate manner Reallocates the impact of late and/or inaccurate reporting back to carriers through assessments Applies in all states where NCCI is the statistical agent for Financial Calls 125 ADQIP 11 Applies to 17 Calls: Ratemaking Calls for timeliness and quality Premium-based billing, supplemental, and state-specific for timeliness only Applies to Two Forms: Acknowledgment Form Self-Audit Form 126 63
ADQIP Timeliness and Quality Policy Year Calls: 3, 3A, 20, 32A, 32V Calendar-Accident Year Calls: 5, 5A, 21 Reconciliation Call: 8 Large Loss and Catastrophe Calls: 31, 33 127 ADQIP Timeliness Only Quality Forms: Acknowledgment and Self-Audit Forms Premium-Based Billing Call: 1 Supplemental Calls: 10, 19 State-Specific Calls: 10T, 14, 26 128 64
ADQIP Incentive of early reporting credits: Applies to Calls 3 and 5 only Calls must be submitted by March 15 Acknowledgment Form and Self-Audit Form must be received by April 1 129 ADQIP Assessments for late and/or inaccurate data: Timeliness per Call/form, per day, per state, based on each carrier s state market share 130 65
ADQIP Quality per edit occurrence: Unaddressed edits are subject to an assessment of $300 Corrected edits (to correct Call data by August 31) are subject to an assessment of $50 Edits with incomplete/vague or no explanation are subject to a $50 assessment Edits that require a notification are subject to a $50 assessment 131 ADQIP Edit assessment example: A Call is submitted with an unaddressed edit A notification is sent to advise that a correction or complete explanation is required The edit remains uncorrected, and the explanation is left vague and incomplete Result Amount Reason In this scenario, the $300 Unaddressed edit assessment would + $50 Blank explanation field be $400: + $50 Notification Maximum assessment = $400 per edit occurrence 132 66
ADQIP Other Details Consider all ADQIP program criteria Data Quality Web page Link from the Financial Call Reporting Guidebook Includes details for Performance Reports (assessment letters) and Appeal Procedures Carriers can use the online Data Manager Dashboard to monitor Call submissions, timeliness, and quality assessment status 133 Carrier Data Quality Report Card Annual Evaluation the Carrier Data Quality Report Program (Report Card): Applies to ratemaking Calls as expected for each carrier group Issued at carrier group level A measure of timeliness and quality: Grading: Timeliness Grade is based on the average days late (grade of A F) Quality Grade is based on the average number of errors (grade of Pass or Fail) 134 67
Data Quality Remediation Program Process where NCCI works with data providers to resolve significant data reporting issues Development of Remediation Program as outlined in the Financial Call Reporting Guidebook, including: Timeline for resolving issues Objectives to meet data reporting standards Regular communication between NCCI and data provider Regulatory monitoring/participation, if warranted 135 Review Time! 136 68
Review If you have an LCM of 1.690, how would you enter it in the Active Deviation screen in the Financial Data Collection Tool? True or False: It is best to create/validate your Calls on a Call-by-Call basis. How do you know if you have edits? True or False: Correct as Reported is a sufficient explanation for an edit. 137 138 69
Supplemental Information
Presenter Biographies Brian Barnett has worked at NCCI for 14 years. He is currently a senior data analyst for the Financial Data Team in the Data Resources Division. His primary duties include serving as a lead in the Quality Program and performing data validation for complex carriers. Brian has a bachelor of science degree in geographic information systems from Florida Atlantic University. Ferne Friedberg has been with NCCI for 12 years. She is currently a lead data analyst in the Data Resources Division. Previously, she worked in the Customer Operations Division as an experience rating analyst. Prior to joining NCCI in 2002, Ferne s career was in the life insurance industry for more than 15 years, many of which were spent in life insurance underwriting.