The National Council on Compensation Insurance (NCCI) held its 2015 Advisory Forum for Louisiana yesterday in Baton Rouge. Cathy Booth, Nadege Bernard-Ahrendts and Susan Schulte led several presentations on the rating agency’s current countrywide and local data, focusing on Louisiana’s balanced environment and the recommended 2.7 percent loss cost decrease for May 2016.
Key statistics in the presentation included:
- Across the country, calendar year and accident year combined ratios continued to improve and net written premium volume has increased for the fourth consecutive year. Further, lost time claim frequency again decreased while medical and indemnity severity are up about four percent.
- Louisiana largely echoes the national picture. NCCI’s preliminary 2014 numbers show premium volume for carriers in Louisiana at $869 million, the second highest level since 2006 and a $57 million increase from 2013.
- Combined ratios in Louisiana continue to improve steadily – to 103 in accident year 2014 versus 106 in 2013. This places us in the middle of the pack nationally, with West Virginia’s 84 at the low end and Oregon’s 132 at the top. Overall, the workers’ comp market is enjoying a modest underwriting profit, with an average combined ratio of 98.
- NCCI’s filing activity in Louisiana has been relatively balanced in the past five cycles. The voluntary loss cost decrease of 2.7 percent for next May constitutes the third consecutive decrease. The last increase was 2.5 percent, in the 2012/2013 filing.
- Among all of the NCCI states (30 reviewed), 22 states have filed a decrease, seven states have no change or an increase, and one state has not submitted a filing. The range of voluntary filings sits at -14.8 percent to +3.4 percent.
Regarding the specifics behind Louisiana’s May 1st Loss Cost Filing, the breakdown is as follows:
- Experience and trend account for -3.1 percent of the change (experience -1.1 and trend -2.0)
- Benefits account for +.4 percent of the change. The majority of benefit costs in Louisiana are medical in nature (57 percent). Regionally, medical benefits constitute 61 percent of total benefit costs.
Data behind frequency and severity in Louisiana presented a mixed picture:
- Lost-time claim frequency decreased by 6 percent in policy year 2013. NCCI noted that these latest figures contribute to a cumulative change of -54.2 percent since 1999. In fact, Louisiana’s average claim frequency – at 2,436 claims per 100,00 workers for all claims – is lower than all of the individual states in Louisiana’s region, the regional average, and the national average.
- In the severity arena, Louisiana’s average indemnity claim severity was $40,300 in policy year 2013, a 2.1 percent increase from the prior year. We outstrip all of the states in our region (which includes Alabama, Arkansas, Mississippi, Oklahoma and Texas) in this regard. Oklahoma is the second highest with only $23,700 in average indemnity. However, according to Nadege Bernard-Ahrendts, the actuary who presented this portion of the data, this can be explained in part by Louisiana’s low claim frequency – fewer claims are in the system in general, so the ones that are there are more severe.
- Medical claim severity has also continued to rise in the latest data, hitting $49,900 on average for policy year 2013. This is a two percent increase from 2012, but far more modest compared to the 14.5 percent jump between 2011 and 2012.
- Regionally, average medical claim severity in our state is the highest. Alabama comes close with $47,700.
- In general, indemnity and medical severities have remained relatively flat for the past two years.
In addition to the recommendation and detail on the data, Susan Schulte gave attendees a walk through of the online coverage verification system and its search functions, as well as the associated smartphone app, plus an overview of relevant national political and legislative activity.
Further, on the level of local initiatives, OWCA Director Patrick Robinson gave a brief overview of the agency’s objectives and obstacles over the next year, citing the constitutional challenge to the 1009 process, a possible legislative solution to issues with the Medical Director position, updates to the Medical Treatment Guidelines and fee schedule, plus a possible formulary.
As of now, the loss cost reduction for Louisiana is still pending. Additional industry wide research is available on NCCI’s website here.