The State of the States
State Workers’ Comp News
California: Report points to combination of factors pushing frequency
Increases in indemnity claim frequency have been concentrated in the Los Angeles area in the last couple of years. That’s one of the findings of an analysis of California’s rate of injuries of late.
The report notes that while claim frequency increased in most jurisdictions in 2010, it has decreased ever since. California, however, has bucked the trend.
“Since 2010, indemnity claim frequency in California has remained at the higher 2010 level, with preliminary frequency measures for 2012 and 2013 showing further increases, while countrywide frequency information shows a return to the more typical modest decline,” said the California Workers’ Compensation Insurance Rating Bureau. “The WCIRB currently projects close to a 4 percent increase in indemnity claim frequency for 2012 while data for NCCI states shows a 5 percent decline. While 2013 data is not yet available for other states, preliminary data for California suggests another significant increase (5 percent).”
The Analysis of Changes in Indemnity Claim Frequency – 2013 Report points to a combination of factors responsible for keeping claim frequency on the rise in California. Included are:
- A high level of cumulative injury claims, a key driver in the 2010 increase, has continued through 2012. “Almost 10 percent of indemnity claims are estimated to involve a cumulative injury in 2012,” the report said. “Since 2010, increases in cumulative injury claims appear to be much more heavily concentrated in claims with permanent injuries and claims involving injuries to multiple body parts.”
- An increase in the number of late-reported indemnity claims and cumulative injury claims. “While more than 98 percent of accident year 2008 indemnity claims were reported at 18 months, the WCIRB estimates that only 90.6 percent of accident year 2012 indemnity claims will have been reported by 18 months.”
- A shift to more hazardous industries such as construction and manufacturing with the recent economic recovery. A shift away from hazardous industries “significantly dampened what would have been an even larger frequency increase” in 2010, according to the report. “In 2012, rather than dampening claim frequency, shifting industrial mix tended to slightly increase claim frequency.”
- An increase in the number of newer workers into the system who are “often more likely to be injured on the job than more experienced workers,” the report explained. “The proportion of injured workers with less than two years of experience at their current job has grown by 17 percent from 2010 to 2013.”
- The Los Angeles basin is driving the most recent numbers. “The 2010 indemnity claim frequency increase was generally experienced across all California regions,” according to the report. “Indemnity claim frequency increased an estimated 8 percent in the Los Angeles/LA Basin region in 2012 while the other California regions showed a decline.”
- Larger claim sizes are a bigger factor in claim frequency. “The WCIRB’s 2012 report on indemnity claim frequency showed that the 2010 increase was generally experienced in smaller indemnity claims and was having a dampening impact on claim severity,” the report stated. “Contrary to the 2010 increase, recent changes in indemnity claim frequency appear to be more heavily concentrated in larger claim sizes.”
Delaware: Significant rate hike still under review
A proposed 41.75 percent increase for Delaware’s workers’ comp loss costs is on hold and might be for some time. That’s the latest update from the Delaware Compensation Rating Bureau.
The filing “has been subject to administrative and statutory provisions that did not exist for prior filing cycles,” according to a recent rating bureau circular. “Among those provisions are the potential for insurance department examinations of selected insurers’ processes and procedures for managing medical losses, and the participation of a Ratepayer Advocate in the adjudication of the DCRB’s filing.”
The update went on to advise that a decision was not expected until after a hearing, which may not take place until sometime next month. “The DCRB is keenly aware of the critical nature of this pending submission and its implications for carriers, producers, employers and other interested parties, and we will provide circular announcement of any further developments as quickly as possible when such developments occur.”
Meanwhile, a special workers’ comp task force continues trying to identify cost drivers in the system. The Workers’ Compensation Task Force was created by legislation last year to address the 26 percent increase in average workers’ comp rates over the previous two years.
The panel is holding a hearing later this month and is expected to hear a presentation from the Massachusetts-based Workers Compensation Research Institute, according to the Property Casualty Insurers Association of America.
“Workers’ compensation costs are spiraling in Delaware and that threatens the state’s economy with particularly harsh impacts for small businesses. The high costs take a toll on employers,” said Oyango Snell, PCI’s regional manager. “The WCRI can independently compare Delaware’s workers’ compensation system to other states’ systems to identify potential areas of reforms.”
PCI cited figures from A.M. Best saying Delaware’s workers’ comp loss ratio “remains significantly higher than nearby states and the national average.” It said where the U.S. 2011 workers’ comp loss ratio was 65 percent, Delaware’s was 115 percent. In 2012, the U.S. rate was 68 percent while the Delaware loss ratio was 89 percent.
“Clearly, Delaware’s workers’ compensation costs are increasing at an incredible pace,” PCI said. “There are a number of cost driving factors, and now more than ever, PCI is advocating for effective reforms that will drive costs down while maintaining quality care for injured workers.”
Texas ponders becoming NCCI state
A hearing later this month may lead to Texas becoming the 35th jurisdiction for which NCCI is the comp rating agency. The Texas Department of Insurance has filed a petition requesting the change.
“As of December 2013, there are 34 states plus the District of Columbia that are ‘NCCI states,’ which means that NCCI administers certain workers’ compensation functions in those states, 11 independent states, including Texas, and four monopolistic states,” the petition reads. “If Texas becomes an NCCI state, policyholders operating in other NCCI states and carriers writing workers’ compensation coverage in multiple NCCI states would have more consistent rules.”
The petition requests adoption of NCCI’s Basic Manual with Texas exceptions, and the national and Texas-specific endorsements and forms in the NCCI Forms Manual. If the insurance commissioner approves, the change would become effective for Texas workers’ comp policies with effective dates of June 1 or after.
“The NCCI Basic Manual and the Texas exceptions incorporate the Texas classifications currently in effect; so as a result of this rule, the current Texas classifications would remain in effect and would not change to the national classifications used in most NCCI states,” the petition states. “The Texas exceptions include a more formal dispute resolution process than TDI’s current process for disputes about rules or classifications that cannot be resolved between the policyholders and carriers.”
The plan would require insurance carriers to pay additional fees for subscribing to NCCI services in Texas. The top four national workers’ comp carriers currently pay NCCI between 11 and 18 cents per $100 of direct written premium.
“However, the additional fees may be offset by the reduction in the maintenance taxes for workers’ compensation that are payable and due to the Comptroller of Public Accounts on March 1,” the department explains. “NCCI has developed a transition plan through 2015 allowing discounts for additional Texas services.”
Agents will be offered free access to the NCCI Basic Manual with Texas exceptions, and the national and Texas-specific endorsements and forms in the NCCI Forms Manual until June 1. After that, they will be charged an annual $50 access fee.
According to the petition, adopting the cited NCCI manuals and exceptions would allow NCCI to operate in Texas by:
- Drafting new or revised manual rules and forms.
- Filing the rules and forms with the Texas Department of Insurance for acceptance as submitted, acceptance with changes, or rejection.
- Assigning classification codes to businesses upon request.
- Responding to telephone and written inquiries regarding workers’ comp classification and premium calculation.
The Texas insurance commissioner and TDI would continue to undertake such duties as prescribing standard policy forms and a uniform policy, approving non-standard forms and endorsements, determining hazards by classifications, requiring carriers to use the classifications determined for Texas, establishing classification relativities, adopting a uniform experience rating plan, and developing and updating statistical plans, as necessary.