Workers' Comp Annual 'Must-Read' Doc

Thursday, May 10, 2012 | 0

Workers' comp geeks and nerds, your wait is over: NCCI's 2012 Workers' Compensation Issues Report is out. For the uninitiated, NCCI stands for "National Council on Compensation Insurance, Inc." NCCI manages the nation's largest database of workers compensation insurance information, supplying data to more than 900 insurance companies and nearly 40 state governments. See the NCCI state map for a quick glance of states that use NCCI as their licensed rating and statistical organization. NCCI describes the services it offers as "analyzes industry trends, prepares workers compensation insurance rate recommendations, determines the cost of proposed legislation, and provides a variety of services and tools to maintain a healthy workers compensation system."

So the Annual Issues Report is a rather big deal arguably one of the most important workers' comp documents of the year. It offers an annual checkup on the health of market, along with discussion of trends, legislative changes, and the like. Plus, informed commentary on hot topics from various industry leaders.

The cornerstone document in the report is president and chief executive officer Stephen Klingel's annual update, this year entitled Workers' Compensation Market Struggles to Identify a Direction (PDF). Klingel notes that it's no easy matter offering any forecasts because we are in a time of uncertainties and adjustments as we make the long, slow climb from the recession. A few of his observations we found noteworthy:

In what is referred to as "the most surprising and disturbing negative development," claims frequency saw its first increase in 13 years.
After six years of decline in the residual market (aka, "market of last resort" or "the pool"), NCCI is seeing initial signs of an increase.
Direct written premium is showing some growth.
State results show deterioration, with the ratio of increases in loss costs to declines doubling in just two years, a trend that is expected to continue in 2012.

Key quote: "With investment yields at historic lows, the current levels of underwriting losses are not sustainable. Even with what appears to be a temporary increase in investment gains, the combined ratio needs to decline substantially to earn a reasonable return on capital."

Goring forward, uncertainties prevail. There are many wild cards that make forecasting difficult, with two big ones being the effect of the economic recovery and the 2012 election. And while there have been both troubling indicators (a rise in frequency, signs of residual market growth) and more positive indicators (improved investment scenario, growth in written premium), it is too soon to say if any of these are the beginnings of a trend.

Here's an overview of other articles included in the Issues Report - all available for download, and all worth your time.

Robert P. Hartwig looks at the labor market recovery and the impact on insurers.
Harry Shuford talks about the economy and what it will take to get us moving again.
Peter Burton offers a legislative outlook, in which he recaps some of the major changes in 2011 and looks ahead to 2012.
Joe Paduda looks at some key issues driving medical costs, opioid overprescribing and physician dispensing.
Nancy Grover offers an overview of the state of insurance technologies.
Tanya Restrepo and Harry Shuford write about the aging workforce and its effect on comp.
Jim Davis and Yair Bar-Chaim examine the first rise in injury claims frequency in more than a decade.
Dennis Mealy and Karen Ayres discuss the history of ratemaking in workers' compensation.
Charles Tenser examines four of the most discussed legal challenges involving workers' comp.

Julie Ferguson is a marketing consultant for Lynch Ryan and Associates, a Massachusetts employer consulting firm. This column was reprinted with permission from the firm's Workers' Comp Insider blog.