Workers’ Compensation Insurance
It has been a busy month of conventions… NAPEO Legal and Legislative, RIMS and last week the NCCI. On the ground at the PACE conference in New Orleans, a look back at the NCCI AIS.
The National Council of Compensation Insurance (“NCCI”) Annual Issues Symposium is the preeminent conference for understanding all things workers’ compensation. Industry experts in the carrier, reinsurance and brokerage communities converge in Orlando every year in May to better understand the meaningful trends in the workers’ compensation line of insurance. The most meaningful number of this year’s event was 94… the lowest combined ratio of any other year since 1990 with the exception of 2006 (93). It should also be noted that this is a 6 point drop from the 100 of last year and represents one of few years <100.
Based on typical patterns, this is now where capital enters the market… which was illuminated when the NCCI literally sold out of tickets.
With NAPEO’s Legal and Legislative Conference two weeks ago, the NCCI conference last week and PACE in New Orleans this week… it has been a high school reunion of sort – seeing good friends, telling old stories and commiserating on how to make the PEO industry the optimal platform for American business. Health insurance maybe in the news every day but workers’ compensation is the line of business that PEO’s must have.
The origination of the PEO Compass was to provide an executive summary of all things workers’ compensation and how they impact all things PEO. The NCCI is a huge driver of this nationwide and sets rates and rules in 37 states. The document attached is a must read for those like me that are workers’ compensation and data geeks.
https://www.ncci.com/Articles/Documents/II_AIS2017-SOL-Guide.pdf
For those that are not (or would prefer not going through 57 slides), the highlights below:
- The total P/C industry’s 2016 combined ratio (101%) represents a three-point increase versus that for 2015.
- Combined ratios increased in all lines of business except workers compensation (slide 4)
- Premium for the NCCI-serviced Residual Market Pools has remained stable over the last four policy years, at approximately $1.1 billion. (slide 12)
- Between 2015 and 2016, countrywide private carrier direct written premium grew +2.4% (slide 15)
- The percentage change in payroll (+4.5%) is approximately equal to the percentage change in the average wage (+2.5%) plus the percentage change in employment (+1.9%). Employment grew at an above-average rate for the Professional and Business Services; Education and Health Services; Construction; and Leisure and Hospitality sectors. Employment in the Manufacturing sector was flat, while the All Other sector posted a decrease primarily due to declines in Natural Resources and Mining employment (slide 17)
- NCCI workers’ compensation filings with effective dates in 2017 averaged –6.7%… California and New York are already seeking approval for rate decreases which are not even part of this data set (slide 18)
- In 2013, more than 70% of respondents saw an increase in premium at renewal, but by the fourth quarter of 2016, 62% reported seeing a decrease in premium at renewal (slide 23)
- The workers compensation 2016 calendar year combined ratio for private carriers was 94%. This is the second consecutive year that the industry has posted a six-point underwriting gain. Consecutive combined ratios at this level have not been seen in at least the last 30 years (slide 24)
What this means is that workers’ compensation has become a very sexy line of insurance risk-bearers. With favorable improvements in operating and investment performance, the median expected rate of return is +20%. Again, it is therefore no surprise that this years NCCI AIS conference was sold out months prior to the event.
For those that happen to be in New Orleans this week for the annual PACE conference, let’s meet up and strategize in person about the great opportunities ahead for the industry.
– Paul R. Hughes
c: 321.217.7477
e. phughes@libertateins.com
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The PEO Compass is a friendly convergence of professionals and friends in the PEO industry sharing insights, ideas and intelligence to make us all better.
All writers specialize in Professional Employer Organization (PEO) business services such as Workers Compensation, Mergers & Acquisitions, Data Management, Employment Practices Liability (EPLI), Cyber Liability Insurance, Health Insurance, Occupational Accident Insurance, Business Insurance, Client Company, Casualty Insurance, Disability Insurance and more.
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