Industry Update

Workers’ Comp Line in Robust Health

All signs point to positive trends in the workers’ comp market, which is good news for policyholders as well as insurers.
By: | June 1, 2017 • 3 min read

Recent data from the National Council on Compensation Insurance shows ongoing positive results for workers’ compensation insurers and favorable conditions for policyholders purchasing the coverage.

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The most recent combined ratio for workers’ comp insurers reveals they are earning underwriting profits, lost-time claim frequency continues its long-term decline, and wage expansion is supporting premium volume growth, among other favorable conditions, according to NCCI’s “2017 State of the Line” information presented during the research and rating organization’s Annual Issues Symposium.

“We are kind of on a roll, it’s a good story,” NCCI President and CEO Bill Donnell told the symposium, held May 17-19 in Orlando, Fla.

Boca Raton, Fla.-based NCCI provides rating services for 38 states.

Kathy Antonello, chief actuary, NCCI

Insurers are not the only ones benefiting, according to information NCCI collected from The Council of Insurance Agents & Brokers.

By 2016’s fourth quarter, 62 percent of agents responding to a survey reported they observed a decrease in workers’ comp premium rates for policy renewals. That stands in contrast to the 74 percent who observed premium rate increases in 2013.

NCCI also saw insurers provide policyholders “deeper discounts” during 2016,  Kathy Antonello, NCCI’s chief actuary, told the Annual Issues Symposium.

An even more recent commercial insurance index report, however, showed that May, 2017 marked the first time this year that renewal premiums increased for workers’ comp policies. Pricing for workers’ comp coverage rose 0.58 percent in May, in contrast to falling 0.19 percent the prior month, according to the May IVANS Index report released June 1, 2017 by Applied Systems.

Private insurers combined ratio, meanwhile, reached 94 percent for 2016. With the 2015 combined ratio also at 94 percent, 2016 marked the second consecutive year that the workers’ comp insurance industry recorded a six-point underwriting gain.

“We haven’t seen consecutive combined ratios at this level at least since 1975,” Antonello said.

The combined ratio is “even more remarkable,” because a single carrier’s experience added four points to the industrywide ratio. Antonello did not name the insurer, but she emphasized that the combined ratio would have stood at 90 percent for 2016 had it not been for that one insurer’s experience.

The industry’s loss ratio, which compares net incurred losses to net earned premium and is a component of the combined ratio, dropped to 53 percent for 2016 after reaching 54 percent the prior year.

“You have to go back to the mid-1990s to find ratios anywhere near the level we are seeing now,” Antonello said.

Insurer operating gains were also “well above average” for 2015 and 2016, Antonello said.

“We haven’t seen consecutive combined ratios at this level at least since 1975.” — Kathy Antonello, chief actuary, NCCI

Although insurers have been on “a good ride” during the past four years, the industry can’t be over confident, Donnell told the symposium.

“We work in a cyclical industry and history does repeat itself,” he cautioned.

Recent conditions, however, have been mostly favorable.

Private workers’ comp insurers’ net written premium growth was stagnant for 2016, hitting $40.1 billion for the year, compared to a total of $39.7 billion for 2015. When state fund net written premium results are included for 2016, the total amount reached $45.5 billion.

In contrast to 2016, private insurers wrote $37.8 billion in net written premium during 2005, a peak year prior to the Great Recession.  The total for 2005 stood at $47.8 billion when including state fund results.

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While insurers’ net written premium growth stagnated during 2016, the U.S. economy added nearly 16 million jobs between the depth of the Great Recession in 2010 and 2016. The related payroll expansion during those years helped add $10 billion in net written growth, contributing to the $40.1 billion insurers reported through 2016.

Other trends reported by NCCI include:

  • Average lost-time claim frequency across states where NCCI recommends rates declined by 4 percent in 2016.
  • Workers’ compensation was the only property casualty line not experiencing 2016 combined ratio deterioration.
  • On average, state approved premium levels decreased 6.7 percent.
  • For 2015, physician costs equaled 40 percent of total workers’ comp claim medical expenses, while prescription drugs amounted to 11 percent of the expenses.
  • Repackaged drugs now represent a small portion of overall drug spend due to states implementing regulations.
Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]