2002 national council on compensation insurance, inc. 1 casualty actuarial society the changing...

2002 National Council on Compensation Insurance, Inc.

1

Casualty Actuarial SocietyThe Changing Insurance Market

Workers’ Compensation Issues

Monday, April 15, 2002

Barry I. Llewellyn, NCCI

Harry Shuford, NCCI


2

WHAT WE’LL COVER TODAY

Financial Overview of WC Line

Residual Market Activity

System Cost Drivers

Frequency Research

Terrorism Issues


3

FINANCIAL OVERVIEW OF WC LINE


4

WC Calendar Year Combined RatiosContinue To Deteriorate

121

118 123 122109

101 97 99 101108

116 118129

0

20

40

60

80

100

120

140

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001p

Loss LAE Underwriting Expense and Dividends

Combined Ratio

p Preliminary NCCI estimate

Source: AM Best Aggregates & Averages

8% Due to Sept. 11


5

123 122

109

10197 99 101

108

116 118

112

10095 96

101

107

120

129

137

129133

133?

90

100

110

120

130

140

Calendar Year Accident Year

WC Calendar Year 2001 Results Deteriorated, While Accident Year Results Remain Steady

Calendar Year vs. Ultimate Accident YearCountrywide—Private Carriers

CY 2001p estimate from AM Best Review/Preview, January, 2002; AY 2001p estimate from NCCIAM Best Aggregates & Averages (Historical CY Ratios)Includes dividends to policyholders.Accident year data is evaluated as of 12/31/00 and developed to ultimate.

Combined Ratio

8% Due to Sept. 11


6

-3.8

-7.9-4.4

8.4

19.8 18.4 19.1

4.20.7

-13.1

13.311.5

-15

-10

-5

0

5

10

15

20

25

1990* 1991* 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001p

Calendar Year

Preliminary 2001 Results WC Pretax Operating Gain/Loss Ratio

p Preliminary.Investment gain includes investment income and realized gains.* Adjusted to include realized capital gains to be consistent with 1992 and after.

8% Due to Sept. 11

-5.1


7

-10.6%

-7.8%

-14.3%

-7.5% -6.8% -7.4%-8.9%

-17.4%

-21.8%-23.4%

-20.2%

-25%

-20%

-15%

-10%

-5%

0%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Dividends Schedule Rating Departure Rate/Loss Cost Departure

Cumulative Rate/Loss Cost Departure, Schedule Rating, and Dividends

NCCI States—Private Carriers

Based on data through 12/31/2000 for the 37 states where NCCI provides ratemaking services.Rate states are: AZ, FL, ID, IL, IN, IA, NV, RI, TX, and WI.Dividend ratios are based on calendar year statistics.


8

-4.1%-3.5%

3.5%4.9%

0.1%

7.5%

13.6%

9.0%

4.4%3.9%

8.0%

4.1%

5.9%

11.5%

5.8%

11.8%

-5%

0%

5%

10%

15%

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

New Business Policies Experienced Greater Average Reported Rate Changes Compared to Renewals

NCCI States

Renewals New Business

Avg Reported Rate Chg

2000 2001


9

Average Reported Rate Changes NCCI States

Renewals

New Business

2000 2001-5.0%

0.0%

5.0%

10.0%

15.0%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Per

cen

t C

han

ge

to P

rio

r Y

ear


10

p Preliminary (states approved to date in 2002).Countrywide approved changes in advisory rates, loss costs andassigned risk rates as filed by the applicable rating organization.

Following Six Years of Decreases, the Average Approved Bureau Rate/Loss Cost Changes

Have Been Increases for the Last Three Years

History of Average Bureau Rate/Loss Cost Level Changes

6.1

12.1

7.410.0

2.9

-6.0

-3.0-5.7

-7.6-5.4

-2.3

3.51.2 1.5

-10

-6

-2

2

6

10

14

Calendar Year

Perc

en

t


11

RESIDUAL MARKET ACTIVITY


12

* Excludes Maine Residual Market Pool.** Projected to ultimate.

Residual Market PremiumVolume on the Rise . . .

as of 9/30/2001

0.3 0.40.3

4.1

2.62.1

1.2

2.8

3.54.0

4.44.8

3.1

2.0

1.00.6

0

1

2

3

4

5

6

85 86 87 88* 89* 90* 91* 92* 93 94 95 96 97 98 99 00** 01**

Policy Year

$ B

illio

ns

$530,000


13

* Excludes Maine Residual Market Pool.** Projected to ultimate.

Residual Market Combined RatiosContinue to Grow

as of 9/30/2001

117 119 121112

103989497

102111

126

142

159166169165

176

80

100

120

140

160

180

200

85 86 87 88* 89* 90* 91* 92* 93 94 95 96 97 98 99 00**01**

Policy Year

Pe

rce

nt


14

Residual Market Activity Four Quarters 2001 vs. Four Quarters 2000

• Number of applications assigned is up +35%

(59,289 vs. 44,102)

• Assigned premium is up +92%

(333,670,974 vs. 173,993,838)


15

Residual Market Total Applications Bound

2001 vs. 2002

0

200

400

600

800

1000

1200

1400

1600W

K1

WK

5

WK

9

WK

13

WK

17

WK

21

WK

25

WK

29

WK

33

WK

37

WK

41

WK

45

WK

49

Note: 9/11 Incident– WK36

9/11

All Plan States


16

Residual Market Application Premium Bound

2000 vs. 2001 vs. 2002

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full YTD

2000 2001 2002


17

Residual Market Application Premium Bound

2001 vs. 2002

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000W

K1

WK

4

WK

7

WK

10

WK

13

WK

16

WK

19

WK

22

WK

25

WK

28

WK

31

WK

34

WK

37

WK

40

WK

43

WK

46

WK

49

WK

52

Note: 9/11 Incident – WK36

9/11


18

Average Residual Market Premium Size

Year Size

1999 $2,141

2000 $2,957

2001 $4,199

2002 (YTD) $5,691


19

Residual Market PolicyholdersSize of Premium: $100,000 and Greater

Year Amount

1999 247

2000 184

2001 1,232


20

SYSTEM COST DRIVERS


21

6

7

8

9

10

11

12

13

14

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Accident Year

0.60

0.80

1.00

1.20

1.40

1.60

Indemnity Claim Cost CPS Indexed to 1990

The Rate of Change in WC Indemnity Claim Costs Has Accelerated Since 1995

NCCI States - Private Carriers

Based on data through 12/31/2000, developed to ultimate. CPS (Current Population Survey) Bureau of Labor Average Weekly WagesBased on the states where NCCI provides ratemaking services.Excludes the effects of deductible policies.

1990-1995: -0.2% annual change 1995-2000: +6.8% annual change

Indemnity Claim Cost (000s) CPS Index to 1990


22

6

7

8

9

10

11

12

13

14

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Accident Year

0.80

1.00

1.20

1.40

1.60

1.80

Medical Claim Cost Medical CPI Indexed to 1990

WC Medical Claim Costs Have Also Continued Their Consistent Upward Trend

NCCI States - Private Carriers

Based on data through 12/31/2000, developed to ultimate.Based on the states where NCCI provides ratemaking services.Excludes the effects of deductible policies.

1990-1995: +2.4% annual change 1995-2000: +7.6% annual change

Medical Claim Cost (000s) Medical CPI Index to 1990


23

0.0%

-8.3%

-16.5%

-25.5%

-31.2%

-32.9%

-25.9%

-22.0%

-16.8%

-4.2%

-35.5%-40%

-30%

-20%

-10%

0%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Accident Year

Ch

an

ge

in

Fre

qu

en

cy

pe

r 1

00

W

ork

ers

The Frequency of Lost-Time ClaimsHas Continued to Fall Through 2000

Cumulative Change in Frequency - Private Carriers

Based on data through 12/31/2000, developed to ultimate.Based on the states where NCCI provides ratemaking services.Excludes the effects of deductible policies.

Cumulative change of -35.5% since 1990


24

FREQUENCY RESEARCH

2002 National Council on Compensation Insurance, Inc. 25

Searching for the Factors Driving the Change in Frequencywith Special Interest in the Decline of the 1990s

Using Data from the Bureau of Labor Statistics onWorkplace Injuries - 1992-1999

presentation to the

Casualty Actuarial Society

Seminar on The Changing Insurance Market

April 15, 2002




Outline1. Key Findings2. Back Injuries – Great Improvement Everywhere; Room for More 3. A Long-term View - Trends and Cycles in Frequency4. The Special Case of the 1990s – Less Cycle, More Down Trend5. Board-based Movements – It’s Everywhere – Industries & Occupations6. Board-based Movements – It’s Everywhere – Injury Characteristics7. Board-based Movements – It’s Everywhere – Age, Gender, Job Tenure


Searching for the Factors Driving the Change in FrequencyLooking at Three Decades of Experience

The key findings include:

Frequency changes are cyclical around a long-term tendency to decline.

Over long periods of time the relative importance of these two factors varies considerably.




Swings in the business cycle, especially as reflected in changes in employment, are associated with similar swings in frequency –

downward pressure in recession

upward pressure during periods of robust growth.




The 1990s diverge from earlier periods;

the business cycle effects were present but

were overcome by changes in the workplace as reflected by marked improvements in productivity.


30



• What Happened in the 1990s? • Can It Continue?

• The Approach – Compare Areas with Dramatic Declines vs. Those with Limited Declines and Increases – Identify Key Underlying Differences

• It Didn’t Get Us Very Far!




The decline is broad-based –

across industries and occupations and across virtually all injury “demographics” including

age, gender, event, source, body part injured,Tenure with employer.




In spite of the dramatic declines

there is virtually no change in the relative position of industries and occupations.

In general

the most risky remain the most risky;

the safest are still the safest.




In spite of the diverse nature of the decline at least one clear factor stands out

the dramatic decline in back injuries outstrips the declines in all other injury categories.


34


Check Out the Decline in Back Injuries

This Seems to be the Most Dramatic Feature of the Improvement in the 1990s


35

Reduction in Back Injuries is SignificantAll Industries

Down 32% vs. 22% for All Other

SIC PART Avg Inj. 92,93 Avg Inj. 98,99 % Inj. 92,93 % Inj. 98,99 % ChangeALL All codes combined 2,291,845 1,716,502 100.0% 100.0% -25.1%

All other codes 1,657,647 1,284,297 72.3% 74.8% -22.5%back, including spine, spinal cord 634,198 432,206 27.7% 25.2% -31.9%


36

Reduction in Back Injuries is Significantfor All Major Industry Groups

Decline In Cases

-60% -50% -40% -30% -20% -10% 0%

Mining

Finance, Insurance, Real Estate

Manufacturing

Retail Trade

Services

Total

Construction

Wholesale Trade

Transportation, Communication, and Public Utilities

Ind

ustr

y

Back, including spine, spinal cord

Other Than Back Codes


37


Check Out the Decline in Back Injuries

More on This Later – First the Longer Term View


38


Trends and Cycles in Frequency


39

The Rate of Work Related Injuries Has Trended DownwardSlowly since the 1920s

Trends in Workplace Injuries and Illnesses

0

5

10

15

20

25

19

26

19

29

19

32

19

35

19

38

19

41

19

44

19

47

19

50

19

53

19

56

19

59

19

62

19

65

19

68

19

71

19

74

19

77

19

80

19

83

19

86

19

89

19

92

19

95

199

8

Year

Ra

te o

f In

jury

per

100 F

TE

Wo

rkers

Injuries per 100 full-time workers in manufacturing Injuries and Illness per 100 full-time workers in all industries Long Term Trend Line

Trend Line


40

Or

The Rate of Work Related Injuries Has Trended Downward Dramatically since the 1920s

Trends in Workplace Injuries and Illnesses

0

5

10

15

20

25

1926

1929

1932

1935

1938

1941

1944

1947

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

Year

Rate of I

njury pe

r 100 FT

E Worke

rs

Injuries per 100 full-time workers in manufacturing Injuries and Illness per 100 full-time workers in all industries Long Term Trend Line

Trend Line


41


What can explain this tendency for frequency to decline over extended periods of time?

• According to the Federal Reserve Bank of Dallas –

Competitive labor markets require continuing improvement in working conditions and productivity

Source: “Have a Nice Day”, Annual Report 2000, Federal Reserve Bank of Dallas

• Reflected in technological advances


42


What can explain this tendency for frequency to decline over extended periods of time?

Technological advances - Key concepts:

– Robotics– Modular design and construction– Power assisted processes– Ergonomic design– Cordless tools– Stronger, lighter weight materials (e.g. fiber glass rather than wooden

ladders)– More and better training


43


Technological advances - Examples:

Manufacturing – Robotics

Warehouse, trucking, garbage collection, etc.Power assisted – fork lifts, Power tail gates

Transportation Bigger trucks, Power assisted handling

Repair service – auto, appliance, etc. Power tools, Snap-in modular parts

Communications Head sets vs. hand held

Construction Modular units and offsite prefabrication

Clerical support Computer assisted typing, calculating, filing

Food service Microwaves and prepared frozen meals in place of hot surfaces and open flames

Disposable plates and utensils vs washing


44


OK – the Long Term Decline Makes Sense

How about Short Term Movements?________________________________

Frequency Typically Tracks with the Business Cycle


45


What’s This about Frequency and the Business Cycle Moving Together?

Surely Frequency Will Start Rising Now that the Strong Economic Growth of the 1990s Has Eased.


46


Possibly but Probably Not________________________________________

Frequency Tracks with the Business Cycle

Looking at Forty Years of History


47

Frequency Typically Falls During Recessionsbut

Seems to Increase during Strong Recovery and Expansion__________

Changes in Direction Track with Peaks and Troughs in Economic Cycles

1960

Q1

1961

Q1

1962

Q1

1963

Q1

1964

Q1

1965

Q1

1966

Q1

1967

Q1

1968

Q1

1969

Q1

1970

Q1

1971

Q1

1972

Q1

1973

Q1

1974

Q1

1975

Q1

1976

Q1

1977

Q1

1978

Q1

1979

Q1

1980

Q1

1981

Q1

1982

Q1

1983

Q1

1984

Q1

1985

Q1

1986

Q1

1987

Q1

1988

Q1

1989

Q1

1990

Q1

1991

Q1

1992

Q1

1993

Q1

1994

Q1

1995

Q1

1996

Q1

1997

Q1

1998

Q1

1999

Q1

2000

Q1

0

2

4

6

8

10

12

14

16

18

RecessionsStrong Expansion Periods (Above Average Chg Among All Expansion Periods-Employment/avg excl. period 1)Injuries and illnesses per 100 full-time workers in manufacturingInjuries and illnesses per 100 full-time workers in private industry

Country-Wide Patterns of Frequency (BLS Basis) during Business CyclesManufacturing (1960-1999) and Private Industry (1972-1999)

Incidence Rates of Workplace Injuries and Illnesses resulting in Days Away From Work


48



Probably the Cost of Inexperienced Workersbut

The Decline in the 1990s Seems to be Different


49

The Year-to-Year Changes in Injury Rates Have Tracked Closely with Year-to-Year Economic Changes

- Are the 1990s an Exception?(% changes in injury rates, GDP, and Employment - Private Sector)

-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Recessions % change Injuries per 100 full-time workers (Private)

% change in Private Employment (000's of Workers)


50

Searching for the Factors Driving the Change in Frequency

with Special Interest in the Decline of the 1990s

The 1990s May Seem Differentbut

Frequency Still Tracks with the Business Cyclewhen

Combined with a Powerful (Linear) Downtrend___________________________________________________

A Regression Analysis


51

% Change in Frequency – 1977 through 1999

Estimated Values Capture the Key Turning Points in the Actual Series

Due Only to the % Change in Economic Activity

Actual vs. Predicted Based on % Change in GDP and a Linear Downtrend after 1990

Actual vs. Fitted % Change in Freq - All Industries

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

% change Injuries and Illness per 100 full-timeworkers in all industries

fitted %D GDP and Trend 1991=1

Adj R**2 = 53.4%Correlation = 73.1%


52


• What Is the Source of this Downtrend?

• Will the Improvement Hold?

• Will the Decline Actually Reverse?


53


Country Wide Experience in the 1990sA Steady Decline

How Remarkable Is This?


54

The Decline Country Wide Continued Unabated over the Decade

Frequency Trend - Country-Wide

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

1992 1993 1994 1995 1996 1997 1998 1999

Fre

qu

ency

(In

jury

per

Em

plo

yee)

Country-Wide


55


The Downtrend in Frequency in the 1990s

It’s Remarkable

and

It’s International


56

The Incidence Rates of Workplace Injuries in Other Industrial Nations Have Also Declined Steadily During the 1990s

Canada and Japan Among Others

Trends in Frequency: US & JAPAN 90s Experience

0

5

10

15

20

25

30

1988 1990 1992 1994 1996 1998 2000

Fre

qu

ency

(Cas

e p

er E

mp

loye

e)

0

0.5

1

1.5

2

2.5

3

3.5

FreqUS

FreqJPN

Trends in Frequency: US & CANADA 90s Experience

0

5

10

15

20

25

30

35

40

1988 1990 1992 1994 1996 1998 2000

Freq

uenc

y(C

ase

per

Em

ploy

ee)

0

5

10

15

20

25

30

FreqCAN

FreqUS


57


Monitoring the Experience of Major Industries

The Declines Impacted All Industries


58

The Rate of Work Related Injuries Declinedby More than 30% in All but One of the Major Industry Groups

between 1992/93 and 1998/99

-50% -40% -30% -20% -10% 0%

Services

Mining

FIRE

Agriculture

Retail Trade

ALL

Construction

Manufacturing

Wholesale Trade

TCPU


59


Monitoring the Experience of Major Industries

They All Track with the Country Wide Experience____________________________________________________________

More Regression AnalysisActual vs. Fitted Based on Country Wide


60

All Industries Track the Country Wide Decline

Frequency Trends Agricultural vs. Country-Wide

0.00

20.00

40.00

60.00

80.00

100.00

1992 1993 1994 1995 1996 1997 1998 1999Time (Years)

Fre

qu

ency

(In

jury

per

E

mp

loye

e)

Country-WideAgricultural

Estimated Agricultural

Frequency Trends Mining vs. Country-Wide

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

1992 1993 1994 1995 1996 1997 1998 1999

Frq

uen

cy(I

nju

ry p

er E

mp

loye

e)

Country-Wide

Mining

Estimated Mining

Frequency Trends Manufacturing vs. Country-Wide

0.00

5.00

10.00

15.00

20.0025.00

30.00

35.00

40.00

45.00

50.00

1992 1993 1994 1995 1996 1997 1998 1999

Fre

qu

ency

(In

jury

per

Em

plo

yee)

Country-Wide

Manufacturing

Estimated Manufacturing

Frequency Trends Transportation vs. Country-Wide

0.00

10.00

20.00

30.00

40.00

50.00

60.00

1992 1993 1994 1995 1996 1997 1998 1999

Fre

qu

ency

(In

jury

per

Em

plo

yee)

Country-Wide

Transportation

Estimated-Transportation


61

All Industries Track the Country Wide Decline

Frequency Trends Whole Sale vs. Country-Wide

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

1992 1993 1994 1995 1996 1997 1998 1999

Country-Wide

Whole Sale

Estimated Whole Sale

Frequency Trends Retail Trade vs. Country-Wide

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

1992 1993 1994 1995 1996 1997 1998 1999

Fre

qu

en

cy

(In

jury

pe

r E

mp

loy

ee

)

Country-Wide

Retail Trade

Estimated Retail Trade

Frequency Trends Finance vs. Country-Wide

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

1992 1993 1994 1995 1996 1997 1998 1999

Country-Wide

Finance

Estimated Finance

Frequency Trends Services vs. Country-Wide

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

1992 1993 1994 1995 1996 1997 1998 1999

Fre

qu

ency

(In

jury

per

E

mp

loye

e)

Country-Wide

Services

Estimated Services


62

As a Consequencethe riskier industries remained riskier and

the safer ones remained safer

Industry Freq Freq

DESC 92/93 98/99

ALL

AGRICULTURE, FORESTRY, AND FISHING 1 1 MINING 2 3 CONSTRUCTION 3 4 TRANSPORTATION, COMMUNICATIONS, AND 4 2 MANUFACTURING 5 5 WHOLESALE TRADE 6 6 RETAIL TRADE 7 7 SERVICES 8 8 FINANCE, INSURANCE, AND REAL ESTATE 9 9

Rank


63


Monitoring the Experience of Major Occupations

The Declines Impacted All Occupations


64

The Rate of Work Related Injuries Declinedby More than 30% in All Major Occupations Groups

between 1992/93 and 1998/99

-50% -40% -30% -20% -10% 0%

Agriculture

Sales

Admin.

Service

Professional

ALL

Operators/ Fabricators

Technicians

Production/ Repair

Managerial


65

As a Consequencethe riskier occupations remained riskier and

the safer ones remained safer

Occupation Freq Freq

DESC 92/93 98/99

ALL

Agriculture, forestry, fishing, and 1 2 Operators, fabricators, and laborer 2 1 Precision production, craft, and re 3 3 Service occupations 4 4 Technicians and related support occ 5 5 Professional specialty occupations 6 6 Marketing and sales occupations 7 7 Administrative support occupations, 8 8 Executive, administrative, and mana 9 9

Rank


66


Maybe the Declines Are Due to Shifts from

Higher Frequency to Lower Frequency:

• Industries?• Occupations?

• Workers?


67

Change in Mix Is Not SignificantIndustry and Occupation

When controlling for changes in employment by industry and by occupation, the frequency only differs by 1 or 2 tenths of a point.

Industry Summary

Actual 1992-93 24.7 Actual 1998-99 15.6

Using 1998-99 Mix 24.5 Using 1992-93 Mix 15.8

Actual 1992-93 48.1 Actual 1998-99 31.6


Actual 1992-93 48.1 Actual 1998-99 31.6


Actual 1992-93Actual 1992-93 48.148.1 Actual 1998-99Actual 1998-99 31.631.6

Using 1998-99 MixUsing 1998-99 Mix 48.348.3 Using 1992-93 MixUsing 1992-93 Mix 31.531.5

Occupation Summary


68

Change in Mix Is Not Significant Gender (not at all) and Age (marginally)

Gender Summary

Actual 1992-93 18.9 Actual 1998-99 12.9


Age Summary

Actual 1992-93 18.7 Actual 1998-99 12.7


When controlling for changes in employment by gender, the frequency is unaffected.

Frequency calculations are most affected.when controlling for changes in the age composition of the workforce.

The share of high frequency 25 to 34 year olds declined and the share of lower frequency 45 to 54 year olds increased.



If the Decline Is Broadly Based Are There Any Meaningful Patterns?

Changes in the Characteristics of Work Related Injuries:•Part of Body

•Event•Source


70


Part of Body


71

Part of Body Injured – Declines in All Major CategoriesTrunk includes Back Injuries

-40% -30% -20% -10% 0% 10%

Trunk

Head

ALL

Neck, Including Throat

Upper extremities

Lower extremities

Other Body Parts

Multiple Body Parts


72


Event or Cause


73

Event or Cause of Injury – Declines in All Categories

-50% -40% -30% -20% -10% 0%

Other events or exposures

Bodily reaction and exertion

Exposure to harmful substances or environments

ALL

Falls

Contact with objects and equipment

Assaults and violent acts

Transportation accidents


74


Source of Injury


75

Source of Injury – Declines in All Categories

-45% -30% -15% 0%

Furniture and fixtures

Other sources

Chemicals and chemical products

Containers

Persons, plants, animals, and minerals

Structures and surfaces

ALL

Machinery

Parts and materials

Tools, instruments, and equipment

Vehicles


76


There Has Been a Slight Reduction in Severity –

Relatively Fewer Injuries Result in More Than 1 or 2 Days Away from Work

But All Categories Were Down by More than 30%


77

Severity Down Based on Days Away from Work

The Frequency of Injuries Resulting in Only 1 to 2 Days Away from Work Declined the Least

Days Aw ay 92-93 Avg 98-99 Avg 92-93 Avg 98-99 Avg 92-93 98-99 Chg in

From Work Count Count Emp Emp Freq Freq Freq

ALL 2,291,845 1,716,502 109,650 127,350 20.9 13.5 -35.5

1 366,172 281,039 3.3 2.2 -33.9

2 296,270 225,460 2.7 1.8 -34.5

3-5 471,356 348,963 4.3 2.7 -36.3

6-10 308,964 225,003 2.8 1.8 -37.3

11-20 260,805 194,025 2.4 1.5 -35.9

21-30 145,379 109,319 1.3 0.9 -35.3

31+ 442,900 332,694 4 2.6 -35.3


78

Changes in the Demographics of Work Place Injuries

Time with Current Employer – Experience Matters

Inexperienced Have a Disproportionately High Share of Total Injuries

Least Experienced Had the Lowest Decline in Total Injuries

If the Decline Is Broadly BasedAre There Any Meaningful Patterns?

Time with Current Employer Share of All Injuries % Decline 92/93 to 98/99Less than 3 months 12% -32%

Three months to one year 18% -34%One year to five years 34% -38%

Five years or more 26% -34%


79


Noted Earlier


Probably the Cost of Inexperienced Workers




Frequency changes are cyclical around a long-term tendency to decline. Over long periods of time the relative importance of these two factors varies considerably.

Swings in the business cycle, especially as reflected in changes in employment, are associated with similar swings in frequency – downward pressure in recession and upward pressure during periods of robust growth.

The 1990s diverge from earlier periods;the business cycle effects were present but were overcome by changes in the workplace as reflected by marked improvements in productivity.





The decline is broad-based – across industries and occupations and across virtually all injury “demographics” including age, gender, event, source, body part injured.

In spite of the dramatic declines there is virtually no change in the relative position of industries and occupations. In general the most risky remain the most risky; the safest are still the safest.

In spite of the diverse nature of the decline at least one clear factor was readily apparent – the dramatic decline in back injuries.


82

TERRORISM ISSUES


83

TERRORISM ISSUES

NCCI’S 4Q2001 ACTIVITIES

Data Reporting Requirements for 9-11 Claims

Experience Rating Filing to Exclude Cat 48 Losses

Filed 4% Terrorism Load in all NCCI States


84

WHY DID NCCI FILE TERRORISM LOAD IN DECEMBER?

Terrorism Losses are Covered Under WC Policy

Exclusion Could Not Be Approved Without Statutory Changes

Congress Adjourned Without Enacting Federal Backstop

Current Rates Do Not Reflect Terrorism Exposure


85

STATUS OF TERRORISM LOAD FILINGS

No State Approvals to Date

Reasons for Inaction

1 4% Not Acceptable 2 Flat % for All Classes

3 Co-Mingling of Collected Funds4 Retroactive Application

Unfunded Exposure Still Remains


86

CURRENT ACTIVITIES

Terrorism/Catastrophe Modeling

Analyzing Data Needs


87

QUESTIONS

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2002 national council on compensation insurance, inc. 1 casualty actuarial society the changing...

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