NCCI State Advisory Forum Focuses on Atypical Market, Louisiana’s Status

NCCI hosted its annual State Advisory Forum for Louisiana today in Baton Rouge. State Relations Executive for Louisiana Clarissa Preston and actuary Brett Foster highlighted the countrywide and local numbers NCCI has analyzed over the last several years, as well as presenting the details for the most recent approved loss cost filing. The presentation slides can be found here.

Countrywide Picture 

Speaking about the national health of the workers’ compensation market, Foster noted that net written premium increased in the most recent year (2018) and that the combined ratio continued its favorable trajectory. Injury frequency has also continued to decline as in previous years, but severity has increased on both the medical and indemnity side, albeit modestly.

 

 

Preliminary 2018 countrywide numbers as presented show that:

  • Net written premium (including state funds) hit $48.6 billion nationwide, versus $45 billion in 2017.
  • The combined ratio was 83 for the 2018 calendar year, versus 89.3 in 2017.
  • The combined ratio was 97 for the accident year as reported, versus 96 in 2017.
  • Lost time claim frequency decreased 1 percent in 2018, versus 4.8 percent in 2017 in NCCI states.
  • Average indemnity claim severity increased 3 percent in 2018, while average medical lost time claim severity increased 1 percent.

Louisiana Picture

For Louisiana, the takeaways were mixed. Overall:

  • Written premium volume has increased for the first time since calendar year 2014, for a $821 million total in 2018. This is contrasted with a $798 million total in 2017.
  • The combined ratio for Louisiana in 2018 was 105, down from 108 in 2017 but still trailing the nationwide improvements. Louisiana has not seen a combined ratio below 100 since 2014, and barely at that.
  • Lost-time claim frequency continues to decrease – 4 percent in policy year 2017 and 6 percent in policy year 2016.
  • Average indemnity claim severity in Louisiana increased 1.5 percent in policy year 2017, versus a decline of 0.6 percent in policy year 2016.
  • Louisiana average medical claim severity increased 8.1 percent in policy year 2017, versus a drop of 3.8 percent in policy year 2016.

Loss Cost Filing: -8.4 Percent Effective May 1st, 2020

The Louisiana Department of Insurance approved NCCI’s loss cost filing for Louisiana on November 8th. The breakdown for the filing is as follows:

Change in Experience: -8.0 percent

Change in Trend: -1.9 percent

Change in Benefits: 0.0 percent

Change in All Other: 1.4 percent

This year’s -8.4 percent filing places Louisiana right in the middle of filing activity for the Southeastern region, with Virginia being the largest decrease at -10.7 percent, and West Virginia being the smallest decrease at -1.6 percent.

Louisiana continues to trail the nation in terms of private employment growth, while wage growth was comparable to the nation. Louisiana’s unemployment rate sits at 4.3 percent, versus 3.7 percent for the United States overall.

Atypical Market

Preston used an NCCI-produced video (available here) to explain the current atypical market in workers’ compensation, noting that the current atypical market followed a short-lived hard market since 2010 and especially since 2014. As the video explained, the current market has characteristics of both soft and hard markets. This includes: price decreases at renewal, readily available coverage, and stiff competition for carriers, offset by improved ratios and low reserve deficiencies. NCCI attributes the atypical market to advances in technology, data analytics, and nontraditional sources of capital lowering the cost of reinsurance.

The entire Louisiana State Advisory Forum presentation is available here.

 

2 Trackbacks

Leave a Comment

Your email address will not be published. Required fields are marked *