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The Annual Issues Symposium—2009 produced by the National Council on Compensation
Insurance Inc (NCCI) offered pertinent and timely information related to workers
compensation. The meeting also provided a forum for the presentation of useful
material pertaining to trends and issues that affect the entire insurance industry.
The symposium kicked off with a comprehensive review of the workers compensation
"State of the Line" delivered by NCCI Chief Actuary Dennis Mealy. He began
his presentation with a synopsis of the current results for the property/casualty
industry. The 2008 net combined ratio for private insurers was 105 percent,
up 10 percent from 2007's 95 percent. But a significant portion of the ratio
increase was attributable to losses sustained by mortgage guarantee and financial
guarantee insurers. When these losses are removed from the 2008 results, the
ratio drops 4 percentage points to 101 percent. And while the investment gain
ratio for 2008 was half of what it had been in 2007, another major indicator
of insurer financial health, the 2008 premium to surplus ratio for private insurers
Moving on to review workers compensation results, Mr. Mealy revealed that
the 2008 preliminary calendar year combined ratio remained level with that of
2007 at 101 percent. And there are other relatively positive indicators for
the line. Lost time claim frequency continues its downward spiral dropping another
4 percent from 2007 to 2008. And the depopulation of the residual market persists
unabated. Between 2004 and 2008, premium in NCCI-serviced residual markets dropped
50 percent. But for all the positive factors there are also several negative
indicators, as well as a few unknowns that could impact the future performance
of the line. Medical claim costs continue to escalate outpacing inflation. Low
investment returns on insurer portfolios persevere as a consequence of the current
economic conditions offering insurers no relief in offsetting underwriting losses.
And insurers are also facing an uncertain political climate with the specter
of national regulation looming.
Mr. Mealy ended his presentation with an update on the new rate making methodology
that NCCI has developed for use in the jurisdictions where it functions as the
rate making organization. The goal of the new methodology is to provide more
stability and equity in the rates. NCCI expects to utilize this new methodology
for all rate filings beginning with those effective October 1, 2009.
Several presentations were also offered that drilled down into workers compensation
topics of current interest. A panel of workers compensation experts took a look
legislative trends at both the state and national level. With new Medicare
reporting requirements for workers compensation losses becoming effective July
1, 2009, three well-timed presentations were delivered highlighting
Medicare's impact on workers compensation, the recent
federal legislation that brought about the reporting requirements, and a
case study related to the use of
Medicare set-asides in California.
A third workshop presented by NCCI staff highlighted their research on a
variety of topics. NCCI Practice Leader and Senior Actuary Barry Lipton reviewed
the duration of temporary disability benefits being provided injured workers
offering insight about the key drivers that influence the length of time benefits
are paid. Mr. Lipton also addressed the
role of narcotics in workers compensation claims advising that the narcotics
share of drug dollars has been relatively stable for the period 1999-2007 with
drugs containing Hydrocodone or Oxycodone accounting for almost 80 percent of
Also included in the workshop was a presentation by NCCI Practice Leader
and Chief Economist Harry Shuford regarding the
impact of recessions on workers compensation. Mr. Shuford's discussion concentrated
on the review of five workers compensation factors affected by recession: exposure
base, claim frequency, indemnity and medical severity, indemnity and medical
loss costs, and investment income.
In addition to the presentations focused on workers compensation, Insurance
Information Institute (III) President and Chief Economist Robert Hartwig shared
his thoughts about the state of the P&C industry focusing on the impact of the
financial crisis and the factors that could shape the industry's future in his
"Financial Crisis, Economic Stimulus & the Future of the P/C Insurance Industry:
Trends, Challenges & Opportunities." Key observations from his analysis
Mr. Hartwig also reviewed some of the trends that will specifically impact
workers compensation in the future.
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