The National Council on Compensation Insurance (NCCI)’s Annual Insights Symposium reviews workers’ compensation data from 34 member states to produce insurance rate and loss cost recommendations. However, 15 states rely on independent bureaus and are not included in their analysis. Some of the largest states in the nation are not part of their data, including California, New York, New Jersey and Pennsylvania. There is no single source for workers’ compensation industry data, and to fully understand the workers’ compensation marketplace, it is important to remember that this is simply a piece of the puzzle, but not the complete picture.
Mark Walls, Safety National’s Vice President of Client Engagement, attended the event, highlighting key insights from the sessions.
State of the Line Report
NCCI’s State of the Line Report analyzes financial indicators, trends and broad economic markers impacting the industry. This year’s report included the industry’s combined net ratio for 2021, which was 87%, but many carriers hesitate to embrace this figure as it does not truly reflect the entirety of the workers’ compensation landscape. When breaking down this figure, there are a few components to keep in mind, including:
- NCCI has some data limitations, which, as indicated by NCCI, some of the data represents NCCI-Serviced markets only.
- The 87% ratio is based on calendar year figures and not accident year. Reserve reductions from previous years and prior investments maturing can influence calendar year figures. The accident year combined ratio may provide a more accurate indication of the expected profitability of the book of business.
- The accident year combined ratio for 2021, as presented by NCCI, was projected to be 102%, which provides a more accurate indication of the expected profitability of the book of business.
- NCCI’s combined ratio analysis excludes some state fund data. State funds typically operate with higher combined ratios than private carriers, so the more complete industry combined ratio would be higher if such data is available.
Some carriers have reported different figures than what NCCI presents. Due to the difference in their state mix compared to NCCI member states, every carrier may see different data based on their state and industry mix. NCCI also collects data from private carriers and state funds in their member states, excluding data from self-insured employers. This means NCCI member states are missing a significant portion of data from the marketplace, especially in industries such as municipalities, K-12 education, colleges and healthcare, which are predominantly self-insured.
NCCI also reported 60,000 COVID-19 claims in member states from 2020 through 2021. Still, the lack of self-insured data means the most heavily impacted industries were not included, like healthcare and municipalities, and states with a higher volume of COVID-19 claims, including California, New York and New Jersey. Data from the California Workers’ Compensation Institute (CWCI) has shown that California alone had almost 260,000 reported COVID-19 claims. So while NCCI data is helpful, it may be less than reliable, particularly in areas relating to the pandemic.
Lost-time claim frequency in 2021 was reportedly 7% higher than in 2020, excluding COVID-19 claims. If including COVID-19 claims in this analysis, lost-time claim frequency increases by 2%. The lost-time frequency had seen a significant decline in 2020 because of business closures resulting from the pandemic.
One thing to point out regarding NCCI’s analysis of claim frequency is that their analysis is based on frequency per $1 million in pure premium, not just the number of claims. Thus, lower frequency does not necessarily mean a lower volume of claims. If pure premium rates increase and claims stay consistent, their data would reflect a decline in the frequency rate because of how it is calculated.