Mega-Trends Affecting the Workers Compensation Insurance Industry
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Mega-Trends Affecting the Workers Compensation Insurance Industry Challenges Amid the Economic Crisis. 6 th Annual National Workers Compensation ExecuSummit Uncasville, CT February 2, 2009. Robert P. Hartwig, Ph.D., CPCU, President

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6 th annual national workers compensation execusummit uncasville ct february 2 2009

Mega-Trends Affecting the Workers Compensation Insurance IndustryChallenges Amid theEconomic Crisis

6th Annual National Workers Compensation ExecuSummit

Uncasville, CT

February 2, 2009

Robert P. Hartwig, Ph.D., CPCU, President

Insurance Information Institute 110 William Street New York, NY 10038

Tel: (212) 346-5520 Fax: (212) 732-1916 [email protected]  www.iii.org


Presentation outline

Presentation Outline

  • Economic Factors Affecting Exposure in WC

    • Economic Downturn and Inflation

  • Overall P/C Insurance Industry Performance Cycles

    • Profitability

    • Underwriting

    • Premium Growth Drivers

    • Investment Performance

  • Workers Comp Performance Review

    • Underwriting performance

    • Premium Drivers

    • Frequency & Severity Trends

    • Predictive Modeling and Workers Comp

  • Mega-Trends/Emerging Issues Affecting Workers Comp

    • The Aging Workforce

    • The Obesity EpidemicNon-English Speaking Workers

  • Other Trends & Concerns

  • Q&A


The economic storm what a weakening economy rising unemployment mean for workers comp insurers

THE ECONOMIC STORMWhat a Weakening Economy & Rising Unemployment Mean for Workers Comp Insurers


Real gdp growth

Real GDP Growth*

Recession began in December 2007. Economic toll of credit crunch, housing slump, labor market contraction is growing

The Q4:2008 decline was the steepest since the Q1:1982 drop of 6.4%

*Yellow bars are Estimates/Forecasts from Blue Chip Economic Indicators.

Source: US Department of Commerce, Blue Economic Indicators 1/09; Insurance Information Institute.


Length of us recessions 1929 present

Length of US Recessions,1929-Present*

Months in Duration

Current recession began in Dec. 2007 and is already the longest since 1981. If it extends beyond April, it will become the longest recession since the Great Depression.

* As of February 2009

Sources: National Bureau of Economic Research; Insurance Information Institute.


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Workplace Injury Incidence Rates

Declined in Last 4 Economic Downturns

p Preliminary

Source: US Department of Labor, Bureau of Labor Statistics (BLS), National Bureau of Economic Research; NCCI Frequency and Severity Analysis


Unemployment rate on the rise

Unemployment Rate:On the Rise

January 2000 through December 2008

Dec. 2008 unemployment jumped to 7.2%, exceeding the 6.3% peak during the previous cycle

Previous Peak: 6.3% in June 2003

Trough: 4.4% in March 2007

Unemployment will likely peak above 8% or 9% during this cycle, impacting payroll sensitive p/c and non-life exposures

Average unemployment rate 2000-07 was 5.0%

Dec-08

Source: US Bureau of Labor Statistics; Insurance Information Institute.


U s unemployment rate 2007 q1 to 2010 q4f

U.S. Unemployment Rate,(2007:Q1 to 2010:Q4F)*

Rising unemployment will erode payrolls and workers comp’s exposure base.

Unemployment is expected to peak above 8% in the second half of 2009.

* Blue bars are actual; Yellow bars are forecasts

Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (1/09); Insurance Info. Inst.


Monthly change employment thousands

Monthly Change Employment*(Thousands)

Job losses in 2008 totaled 2.589 million, the highest since 1945 at WW II’s end; 11.1 million people are now defined as unemployed.

The Nov./Dec. 2008 losses were the largest since May 1980 loss of 431,000, but less than the Dec. 1974 loss of 602,000

Source: US Bureau of Labor Statistics: http://www.bls.gov/ces/home.htm; Insurance Info. Institute


Years with job losses 1939 2008 thousands

Years With Job Losses: 1939-2008*(Thousands)

The US has seen net job losses in only 16 of the 70 years since 1939

2008’s job losses were exceeded only by 1945, at the conclusion of WW II

Source: Insurance Information Institute research from

US Bureau of Labor Statistics data: http://www.bls.gov/ces/home.htm.


New private housing starts 1990 2010f millions of units

New Private Housing Starts,1990-2010F (Millions of Units)

Exposure growth forecast for HO insurers is dim for 2009 with some improvement in 2010.

Impacts also for comml. insurers with construction risk exposure

New home starts plunged 34% from 2005-2007; Drop through 2009 trough is 65% (est.)—a net annual decline of 1.35 million units

I.I.I. estimates that each incremental 100,000 decline in housing starts costs home insurers $87.5 million in new exposure (gross premium). The net exposure loss in 2009 vs. 2005 is estimated at about $1.2 billion.

Source: US Department of Commerce; Blue Chip Economic Indicators (1/09); Insurance Information Inst.


Auto light truck sales 1999 2010f millions of units

Auto/Light Truck Sales,1999-2010F (Millions of Units)

Weakening economy, credit crunch are hurting auto sales; Gas prices less of a factor now.

New auto/light trick sales are expected to experience a net drop of 5.7 million units annually by 2009 compared with 2005, a decline of 20.7%

Impacts of falling auto sales will have a less pronounced effect on auto insurance exposure growth than problems in the housing market will on home insurers

Source: US Department of Commerce; Blue Chip Economic Indicators (1/09); Insurance Information Inst.


Total industrial production 2007 q1 to 2010 q4f

Total Industrial Production,(2007:Q1 to 2010:Q4F)

Obama stimulus program is expected benefit impact industrial production and therefore insurance exposure both directly and indirectly

Industrial production began to contract sharply during H2 2008 and is expected to shrink through the first half of 2009

Figures for H2:09 and 2010 revised sharply upwards to reflect expected impact of Obama stimulus program

Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (1/09); Insurance Info. Inst.


Wage salary disbursements payroll base vs workers comp net written premiums

Wage & Salary Disbursements (Payroll Base) vs. Workers Comp Net Written Premiums

Wage & Salary Disbursement (Private Employment) vs. WC NWP

$ Billions

$ Billions

12/07-?

7/90-3/91

3/01-11/01

Weakening wage and salary growth is expected to cause a deceleration in workers comp exposure growth

Shaded areas indicate recessions

*9-month data for 2008

Source: US Bureau of Economic Analysis; Federal Reserve Bank of St. Louis at http://research.stlouisfed.org/fred2/series/WASCUR; I.I.I. Fact Books


U s 825b economic stimulus package by category

U.S. $825B Economic Stimulus Package, By Category

$ Billions

I.I.I. Estimate

Every 1 million jobs created or preserved will increase (or preserve) as much as $1 billion in workers comp premium. Obama stimulus target is 3-4 million jobs.

Commercial insurance lines that will benefit from the Obama stimulus plan include workers comp, commercial property, commercial auto, surety, inland marine and others

Sources: House Appropriations Committee; Wall Street Journal, January 16, 2009


Real gdp growth vs real p c premium growth modest association

Real GDP Growth vs. Real P/C Premium Growth: Modest Association

P/C insurance industry’s growth is influenced modestly by growth in the overall economy

Sources: A.M. Best, US Bureau of Economic Analysis, Blue Chip Economic Indicators, 8/08; Insurance Information Inst.


Total private employment grew by 25 million workers from 1991 to 2008

Total Private Employment* Grew by25½ Million Workers from 1991 to 2008

Millions

The US economy added 25.5 million jobs between 1991 and 2008, but job growth has recently stagnated, impacted payrolls and the workers comp exposure base

*seasonally adjusted at mid-yearSource: U.S. Bureau of Labor Statistics, at http://data.bls.gov/cgi-bin/surveymost


Average weekly real earnings in private employment were flat from 1999 to 2008

Average Weekly Real Earnings in Private Employment Were Flat from 1999 to 2008

(at mid-year)

Constant 1982 dollars

Virtually all of the real wage growth occurred between 1995 and 1999 and has now stagnated

Sources: U.S. Bureau of Labor Statistics; I.I.I.


New private housing starts 1990 2014f millions of units

New Private Housing Starts,1990-2014F (Millions of Units)

Exposure growth forecast for HO insurers is dim for 2008/09

Impacts also for comml. insurers with construction risk exposure

New home starts plunged 34% from 2005-2007; Drop through 2008 trough is 54% (est.)—a net annual decline of 1.11 million units

I.I.I. estimates that each incremental 100,000 decline in housing starts costs home insurers $87.5 million in new exposure (gross premium). The net exposure loss in 2008 vs. 2005 is estimated at $971 million.

Source: US Department of Commerce; Blue Chip Economic Indicators (10/07), except 2008/09 figures from

8/08 edition of BCEF; Insurance Info. Institute


Total industrial production 2007 q1 to 2009 q4f

Total Industrial Production,(2007:Q1 to 2009:Q4F)

Industrial production affects exposure both directly and indirectly

Industrial production shrank during Q1 2008 and is expected to shrink again in Q2, growing very slowly thereafter

Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (7/08); Insurance Info. Inst.


Medical tort cost inflation amplifiers of inflation major insurance cost driver

Medical & Tort Cost Inflation Amplifiers of Inflation, Major Insurance Cost Driver


Consumer price index for medical care vs all items 1960 2008

Consumer Price Index for Medical Care vs. All Items, 1960-2008

(Base: 1982-84=100)

Inflation for Medical Care has been surging ahead of general inflation (CPI) for 25 years. Since 1982-84, the cost of medical care has more than tripled

Soaring medical inflation is among the most serious long-term challenges facing casualty, disability and LTC insurers

Source: Department of Labor (Bureau of Labor Statistics; Insurance Information Institute.


Tort cost growth medical cost inflation vs overall inflation cpi u 1961 2008

Tort Cost Growth & Medical Cost Inflation vs. Overall Inflation (CPI-U), 1961-2008*

Tort costs move with inflation but at twice the rate

Tort System is an Inflation Amplifier

Avg. Ann. Change: 1961-2008*

Torts Costs: +8.4%

Med Costs: +6.0%

Overall Inflation: +4.2%

*Medical cost and CPI-U from BLS. Tort figure is for full-year 2008 from Tillinghast.

Sources: US Bureau of Labor Statistics, Tillinghast-Towers Perrin, 2007 Update on U.S. Tort Costs; Insurance Info. Inst.


Comparative 2008 inflation statistics important to insurers

Comparative 2008 Inflation Statistics Important to Insurers( %)

CPI and “Core” CPI are not representative of many of the costs insurers face

Medical/Legal costs typically run well ahead of inflation

*Core CPI is the Consumer Price Index for all Urban Consumers (CPI-U) less food and energy costs.

Source: US Bureau of Labor Statistics; Insurance Information Institute.


6 th annual national workers compensation execusummit uncasville ct february 2 2009

P/C INSURANCE FINANCIAL PERFORMANCEA Resilient Industry in Challenging Times


P c net income after taxes 1991 2009f millions

P/C Net Income After Taxes1991-2009F ($ Millions)*

  • 2001 ROE = -1.2%

  • 2002 ROE = 2.2%

  • 2003 ROE = 8.9%

  • 2004 ROE = 9.4%

  • 2005 ROE= 9.4%

  • 2006 ROE = 12.2%

  • 2007 ROAS1 = 12.3%

  • 2008 ROAS = 1.1%*

Insurer profits peaked in 2006.

*ROE figures are GAAP; 1Return on avg. surplus.2008 numbers are annualized based on 9-mos. Actual of $4.066 billion.

Sources: A.M. Best, ISO, Insurance Information Inst.

29


6 th annual national workers compensation execusummit uncasville ct february 2 2009

P/C Insurance Industry ROEs,1975 – 2008E*

1987:17.3%

1977:19.0%

2006:12.2%

1997:11.6%

10 Years

10 Years

9 Years

2008F: 1.1%

1975: 2.4%

1984: 1.8%

1992: 4.5%

2001: -1.2%

Note: 2008 figure is actual 9-month result.

Sources: ISO;Insurance Information Institute.

30


Roe vs equity cost of capital us p c insurance 1991 2008 q3

ROE vs. Equity Cost of Capital:US P/C Insurance:1991-2008:Q3

The p/c insurance industry fell well short of is cost of capital in 2008

+2.3 pts

-1.7 pts

-9.0 pts

-13.2 pts

-9.7 pts

US P/C insurers missed their cost of capital by an average 6.7 points from 1991 to 2002, but on target or better 2003-07

The cost of capital is the rate of return insurers need to attract and retain capital to the business

31

*Excludes mortgage and financial guarantee insurers.

Source: The Geneva Association, Ins. Information Inst.


P c insurance combined ratio 1970 2008f

P/C Insurance Combined Ratio, 1970-2008F*

Combined Ratios

1970s: 100.3

1980s: 109.2

1990s: 107.8

2000s: 102.0*

32

Sources: A.M. Best; ISO, III

*A.M. Best year end estimate of 103.2; Actual 9-mos. result was 105.6.


P c insurance industry combined ratio 2001 2009e

P/C Insurance Industry Combined Ratio, 2001-2009E

As recently as 2001, insurers paid out nearly $1.16 for every $1 in earned premiums

Relatively low CAT losses, reserve releases

Including Mortgage & Fin. Guarantee insurers

2005 ratio benefited from heavy use of reinsurance which lowered net losses

Cyclical Deterioration

Best combined ratio since 1949 (87.6)

33

*Includes Mortgage & Financial Guarantee insurers. Sources: A.M. Best.


Commercial lines combined ratio 1993 2009f

Commercial Lines Combined Ratio, 1993-2009F

Commercial coverages have exhibited significant variability over time.

Mortgage and financial guarantee may account for up to 4 points on the commercial combined ratio in 2008

2006/07 benefited from favorable loss cost trends, improved tort environment, low CAT losses, WC reforms and reserve releases. Most of these trends reversed in 2008 and mortgage and financial guarantee segments have big influence. 2009 is transition year.

Sources: A.M. Best (historical and forecasts)


Underwriting gain loss 1975 2008 q3

Underwriting Gain (Loss)1975-2008:Q3*

Insurers earned a record underwriting profit of $31.7 billion in 2006, the largest ever but only the second since 1978. Cumulative underwriting deficit from 1975 through 2007 is $422 billion.

$ Billions

$19.877 Bill underwriting loss in 08:9M incl. mort. & FG insurers

Source: A.M. Best, ISO; Insurance Information Institute * Includes mortgage & finl. guarantee insurers

36


Number of years with underwriting profits by decade 1920s 2000s

Number of Years With Underwriting Profits by Decade, 1920s –2000s

Number of Years with Underwriting Profits

Underwriting profits were common before the 1980s (40 of the 60 years before 1980 had combined ratios below 100)—but then they vanished. Not a single underwriting profit was recorded in the 25 years from 1979 through 2003.

37

Note: Data for 1920 – 1934 based on stock companies only.

Sources: Insurance Information Institute research from A.M. Best Data. *2000 through 2008.


Strength of recent hard markets by nwp growth

Strength of Recent Hard Marketsby NWP Growth

1975-78

1984-87

2000-03

Shaded areas denote “hard market” periods

Net written premiums fell 1.0% in 2007 (first decline since 1943) and by 0.4% in 2008, the first back-to-back decline since 1930-33

38

Sources: A.M. Best, ISO, Insurance Information Institute


Year to year change in net written premium 2000 2008e

Year-to-Year Change in Net Written Premium, 2000-2008E*

P/C insurers are experiencing their slowest growth rates since 1930-33

Slow growth means retention is critical

Protracted period of negative or slow growth is possible due to soft markets and slow economy

39

*2008 figure is 9-month actual result from ISO.

Source: A.M. Best (historical)


Distribution of p c insurance industry s investment portfolio

Distribution of P/C Insurance Industry’s Investment Portfolio

As of December 31, 2007

Portfolio Facts

  • Invested assets totaled $1.3 trillion as of 12/31/07

  • Insurers are generally conservatively invested, with 2/3 of assets invested in bonds as of 12/31/07

  • Only about 18% of assets were invested in common stock as of 12/31/07

  • Even the most conservative of portfolios was hit hard in 2008

40

Source: NAIC; Insurance Information Institute research;.


Property casualty insurance industry investment gain 1994 2008 q3 1

Property/Casualty Insurance Industry Investment Gain:1994- 2008:Q3 1

Investment gains are off sharply in 2008 due to lower yields and poor equity market conditions.

1Investment gains consist primarily of interest, stock dividends and realized capital gains and losses.

2006 figure consists of $52.3B net investment income and $3.4B realized investment gain.

*2005 figure includes special one-time dividend of $3.2B.

Sources: ISO; Insurance Information Institute.

41


P c insurer net realized capital gains 1990 2008 q3

P/C Insurer Net Realized Capital Gains, 1990-2008:Q3

$ Billions

Realized capital gains exceeded $9 billion in 2004/5 but fell sharply in 2006 despite a strong stock market. Nearly $9 billion again in 2007, but $-9.7 billion in 2008 through Q3.

42

Sources: A.M. Best, ISO, Insurance Information Institute.


Workers compensation review underwriting and operating performance

Workers Compensation Review:Underwriting andOperating Performance


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Workers Comp Combined Ratios, (Calendar Year, Private Carriers) 1994-2007p

WC insurers lopped 30 points off the combined ratio in just 5 years

Percent

p Preliminary.

Sources: Calendar Years 1994-2006, A.M. Best Aggregates & Averages; Calendar Year 2007p NCCI

Includes dividends to policyholders


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Workers Comp Combined Ratios, 1994-2008F*

Percent

A.M. Best expects 2008 combined ratio to rise by 2.5 points

p Preliminary AY figure.

Accident Year data is evaluated as of 12/31/2007 and developed to ultimate

Source: Calendar Years 1994-2006, A.M. Best Aggregates & Averages; Calendar Year 2007p and Accident Years 1994-2007pbased on NCCI Annual Statement Analysis.

Includes dividends to policyholders *2008 figure from A.M. Best.


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Calendar Year Reserve Deficiencies Continue to Decline

$ Billions

WC Loss and LAE Reserve Deficiency: Private Carriers

2007 Tabular Discount Is $5.5 Billion

Calendar Year

Considers all reserve discounts as deficiencies

Loss and LAE figures are based on NAIC Annual Statement data for each valuation date and NCCI latest selections

Source: NCCI analysis


Workers comp cost drivers medical indemnity frequency severity trends

Workers CompCost DriversMedical/Indemnity Frequency & Severity Trends


Workers compensation medical claim trends

Workers Compensation Medical Claim Trends


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Workers Comp Medical Claims Costs Continue to Climb

Medical

Claim Cost ($000s)

Annual Change 1991–1993:+1.9%

Annual Change 1994–2001:+8.9%

Annual Change 2002-2006:+7.8%

Cumulative Change = +200%

(1993-2007p)

Accident Year

2007p: Preliminary based on data valued as of 12/31/2007

1991-2006: Based on data through 12/31/2006, developed to ultimate

Based on the states where NCCI provides ratemaking services; Excludes the effects of deductible policies


Wc medical severity rising at double the medical cpi rate

WC Medical Severity Rising at Double the Medical CPI Rate

Average annual increase in WC medical severity from 1995 through 2007 was more than twice the medical CPI rate (8.2% vs. 4.0%)

Sources: Med CPI from US Bureau of Labor Statistics, WC med severity from NCCI based on NCCI states.


Med costs share of total costs is increasing steadily

Med Costs Share of Total Costs is Increasing Steadily

2007p

1997

1987

Source: NCCI (based on states where NCCI provides ratemaking services).


Wc med cost will equal 70 of total by 2017 if trends hold

WC Med Cost Will Equal 70% of Total by 2017 if Trends Hold

2017 Estimate

This trend will likely be supported by the increased labor force participation of workers age 55 and older.

Source: Insurance Information Institute.


Indemnity claim cost trends

Indemnity Claim Cost Trends


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Workers Compensation IndemnityClaim Costs Growth Is ModerateLost-Time Claims

Indemnity

Claim Cost ($ 000s)

Annual Change 1991–1993:-1.7%

Annual Change 1994–2001:+7.3%

Annual Change 2002–2006:+3.1%

Accident Year

2007p: Preliminary based on data valued as of 12/31/2007

1991–2006: Based on data through 12/31/2006, developed to ultimate

Based on the states where NCCI provides ratemaking services

Excludes the effects of deductible policies


Wc indemnity severity vs wage inflation

WC Indemnity Severity vs. Wage Inflation

WC indemnity severity is once again outpacing wage inflation

2006p: Preliminary based on data valued as of 12/31/2006; 1991-2005: Based on data through 12/31/2005, developed to ultimate. Based on the states where NCCI provides ratemaking services. Excludes the effects of deductible policies. CPS = Current Population Survey.

Source: NCCI


Residual market overview

Residual Market Overview


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Workers Compensation Residual

Market Underwriting ResultsNCCI-Serviced Workers Compensation Residual Market Poolsas of December 31, 2007

$ Millions

*Incomplete Policy Year Projected to Ultimate

Source: NCCI

Policy Year


Investment performance

Investment Performance


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Workers Compensation InvestmentReturns Remain Below Historical Average

Investment Gain on Insurance Transactions-to-Premium RatioPrivate Carriers

Percent

Average (1990–2006): 15.3%

Calendar Year

p Preliminary

* Adjusted to include realized capital gains to be consistent with 1992 and after Investment Gain on Insurance Transactions includes Other Income

Source: 1990–2006, Best's Aggregates & Averages; 2007p, NCCI


Premium growth pricing environment

Premium Growth &Pricing Environment


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Total Workers Compensation Premium Declined Again in 2007Net Written Premium

$ Billions

Calendar Year

p Preliminary

Source: 1990–2006 Private Carriers, A.M. Best Aggregates & Averages; 2007p, NCCI

1996–2007p State Funds: AZ, CA, CO, HI, ID, KY, LA, MO, MT, NM, OR, RI, TX, UT Annual Statements

State Funds available for 1996 and subsequent


6 th annual national workers compensation execusummit uncasville ct february 2 2009

History of Average WC Bureau Rate/Loss Cost Level Changes

Percent

Cumulative 2000-2003

+17.1%

Cumulative 1994-1999

-27.8%

Cumulative 2004-2008

-24.0%

Cumulative

1990-1993

+36.3%

Calendar Year

*States approved through 4/11/2008

Countrywide approved changes in advisory rates, loss costs and assigned risk rates as filed by the applicable rating organization


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Current NCCI Voluntary MarketFiled Rate/Loss Cost Changes

Excludes Law-Only Filings

Percent

States filed through 4/18/2008

Source: NCCI


Alternative risk transfer market saps traditional wc carriers

Alternative Risk Transfer MarketSaps Traditional WC Carriers

$ Billions

Workers Comp account for the largest share of the alternative market, particularly captives

Source: MarketStance.


Frequency severity trends

FREQUENCY & SEVERITY TRENDS


Injury fatality incidence rates and claim cost trends

Injury & Fatality Incidence Rates and Claim Cost Trends


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Rate of Work-Related Injuries Decreases Over Time Due to Improved Working ConditionsRate of Injury per 100 FTE Workers

Source: US Department of Labor, Bureau of Labor Statistics; NCCI


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Workers Comp Lost-Time Claim Frequency Down More than 50% Since 1991

Percent Change

Cumulative Change of –53.3%

since 1991 means that lost work time claims have been cut by more than half

Accident Year

2007p: Preliminary based on data valued as of 12/31/2006

1991-2006: Based on data through 12/31/2005, developed to ultimate

Based on the states where NCCI provides ratemaking services

Excludes the effects of deductible policies

Source: NCCI


6 th annual national workers compensation execusummit uncasville ct february 2 2009

1997-2006: Claim Frequency Declined for All Injury Types Other Than Permanent Total

Percentage Change Between Policies Expiring in 1997 and 2006Claim Frequency per $1M of Wage-Adjusted Payroll

All NCCI states except NV and TX

Source: NCCI Unit Statistical Plan data, First Report


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Lost-Time Claim Frequency

Declined for All Industry Groups

Percentage Change Between Policies Expiring in 2002 and 2006Claim Frequency per $1M of Wage-Adjusted Payroll

All NCCI states except NV and TX

Source: NCCI Unit Statistical Plan data, First Report

Source: NCCI


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Permanent Total Claim

Frequency by Industry Group

Percentage Change Between Policies Expiring in 2002 and 2006Claim Frequency per $1M of Wage Adjusted Payroll

All NCCI states except NV and TX

Source: NCCI Unit Statistical Plan data, First Report

Source: NCCI


6 th annual national workers compensation execusummit uncasville ct february 2 2009

WHY YOU SHOULD FEEL GOOD ABOUT WHAT YOU DOSaving Lives, Increasing Productivity and Much MoreIt’s Not Just About the Money


Did you know that when you prevent a workplace injury you

Did You Know That When You Prevent a Workplace Injury You…

  • Keeping Workers Comp Costs Down is Just the Beginning

  • You Help Companies Remain Productive1

    • Permanently Disabling Injuries 565 Lost Future Work Days on Avg.

    • Fatal Injuries 5,850 Lost Future Work Days on Average

  • You Increase/Preserve Worker Incomes

    • Seriously Injured Workers Have Lower Lifetime Earnings, on Average

    • Reduced Likelihood of Filing Bankruptcy

    • Less Likely to Need Public Assistance

  • You Maintain/Improve the Quality of Worker’s Home Life

    • Higher Incidence of Divorce, Substance Abuse, Depression Among Seriously Injured

  • ALL REASONS TO BE PROUD OF WHAT YOU DO!!

1 US Census Bureau: http://www.census.gov/compendia/statab/tables/07s0639.xls


6 th annual national workers compensation execusummit uncasville ct february 2 2009

Workers Comp Lost-Time Claim Frequency Down More than 50% Since 1991

Percent Change

Cumulative Change of –53.3%

since 1991 means that lost work time claims have been cut by more than half

Accident Year

2007p: Preliminary based on data valued as of 12/31/2006

1991-2006: Based on data through 12/31/2005, developed to ultimate

Based on the states where NCCI provides ratemaking services

Excludes the effects of deductible policies

Source: NCCI


Number of fatal work injuries is continues to fall 1992 2007p

Number of Fatal Work Injuries is Continues to Fall, 1992 – 2007p

Workers comp insurers & the entire workplace safety community have contributed to the 17% decline in workplace fatalities since 1994

Source: US Bureau of Labor Statistics, US Department of Labor; III. *Excludes 9/11 deaths.


Lives saved due to reduction in fatal work injury rate 1995 2006

Lives Saved Due to Reduction inFatal Work Injury Rate, 1995–2006

Reduction in Occupational Deaths Due to Fall in Fatality Rate from 5.3 per 100,000 Workers in 1994 to 4.0 in 2006

Workers comp insurers are a major force in saving worker lives

Nearly 2,000 work lives are saved annually due to improved workplace safety!

Source: Insurance Information Institute from BLS data.


Cumulative lives saved due to reduction in fatal work injury rate

Cumulative Lives Saved Due toReduction in Fatal Work Injury Rate

Cumulative Lives Saved Due to Fall in Fatality Rate from 5.3 per 100,000 Workers in 1994 to 4.0 in 2006

Since 1994, nearly 15,000 worker lives have been saved due to improved workplace safety!

Saving a Life, Saves a Family

Source: Insurance Information Institute from BLS data.


Emerging trends challenges in workers comp

EMERGING TRENDS & CHALLENGES IN WORKERS COMP


1 emerging mega trend the obesity epidemic

#1Emerging (Mega) Trend The Obesity Epidemic


Wc medical claims costs are 6 8x higher for the most obese workers

WC Medical Claims Costs are 6.8x Higher for the Most Obese Workers

Indemnity costs are 11 times higher for the most obese workers than for healthy-weight workers.

Source: Ostbye, T., et al, “Obesity and Workers Compensation,” Archives of Internal Medicine, April 23, 2007.


6 th annual national workers compensation execusummit uncasville ct february 2 2009

It’s Not All Because of Obesity: “Confounding Factors”

  • Some people with high BMI also have other characteristics that contribute to disability and/or death. They…

    • Smoke and/or regularly drink alcohol heavily

    • Are older and/or male

    • Have chronic diseases (e.g., diabetes, heart disease)

    • Have other conditions/circumstances (e.g., no health insurance, don’t exercise) that are related to poor health

      Failure to adjust for these “confounding factors” likely results in overstating the effect of obesity.

Source: Flegal, Graubard, Williamson, and Gail, “Excess Deaths Associated with Underweight, Overweight, and Obesity,” JAMA Vol. 293, No. 15 (April 20, 2005) pp. 1861-1867.


2 emerging mega trend the aging workforce

#2Emerging (Mega)Trend The Aging Workforce


6 th annual national workers compensation execusummit uncasville ct february 2 2009

U.S. Workforce is Aging: Significant Implications for Workers CompMedian Age of U.S. Worker

Older and less healthy workforce

The median age of US workers as the Baby Boomer begin to retire is about 41 years. Immigration will hold this number down and may even lower the figure.

Year

Source: US Bureau of Labor Statistics, 2004.


Fatal work injury rates climb sharply with age

Fatal Work Injury RatesClimb Sharply With Age

Fatal Work Injuries per 100,000 Workers (2006)

The fatality rate for workers 65 and older is triple that of workers age 35-44. The workplace of the future will have to be completely redesigned to accommodate the surge in older workers.

Source: US Bureau of Labor Statistics, US Department of Labor; Insurance Information Institute.


Older workers have more lost time from work due to injury or illness

Older Workers Have More Lost Time from Work Due to Injury or Illness

Age 65+ workers median lost time is 50% greater than workers age 35-44

Median Days Away From Work (2005)

There will be more lost time as the workforce ages in the future.

Source: US Bureau of Labor Statistics, US Department of Labor


Percentage of non commissioned officers suffering from symptoms of ptsd by number of deployments

Percentage of Non-Commissioned Officers Suffering from Symptoms of PTSD by Number of Deployments…

Symptoms of PTSD are 54% more likely to be observed in second deployments and 125% higher in third or fourth deployments

Source: Brookings Institution, Iraq Index Archive, updated August 18, 2008.


3 emerging mega trend non english speaking workers

#3Emerging (Mega) Trend Non-EnglishSpeaking Workers


Fatal worker injury rates by race and ethnicity 2006

Fatal Worker Injury Rates byRace and Ethnicity, 2006

Fatality Rate per 100,000 Workers Employed

Hispanic workers experience highest rate of fatal injuries on the job

Source: U.S. Dept. of Labor, Bureau of Labor Statistics, Census of Fatal Occupational Injuries, 2006


Insurance information institute on line

Insurance Information Institute On-Line

WWW.III.ORG

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