State of the Line Report Featuring Q&A
Donna Glenn, FCAS, MAAA
Chief Actuary, NCCI
NCCI Chief Actuary Donna Glenn shared a quick recap of the
2020 financial highlights (right-click on the image to download) of the workers compensation insurance line, then took a deep dive into the data to provide context and illuminate trends.
The workers compensation line of business is strong, despite experiencing a 10% drop in premium because of the pandemic-induced recession. NCCI reported a calendar year combined ratio of 87, a sign of profitability for insurers. Workers compensation reserves remain robust with the redundancy growing to $14 billion as of year-end 2020.
Other long-term financial metrics, excluding COVID-19 claims, remain strong with frequency dropping 7% in 2020 and indemnity severity nudging upward moderately at 3%. The 2020 change in lost-time medical severity is more challenging to pinpoint. NCCI estimated that change to be between +/- 2%.
Glenn reported that COVID-19 claims are much lower than originally feared with $260 million in incurred losses in NCCI states. Healthcare workers and first responders accounted for more than 75% of the claims. Other essential workers in the food service, building maintenance, distribution, and retail sectors accounted for another 15% of COVID-19 claims.
Key NCCI watchlist issues (right-click on the image to download) include:
- The speed and trajectory of the economic recovery and how it will impact workers compensation premiums
- The pace of COVID-19 claims and vaccinations
- The potential for retroactive presumptions and their possible influence on accident year results
NCCI will conduct ongoing analyses to evaluate whether 2020 was purely an anomaly or if it will result in lasting changes to the workers compensation system.
- The pandemic has demonstrated that the US workers compensation line of business is resilient and strong. While net written premium dropped 10% in 2020, other financial metrics, such as combined ratio, operating margin, and the industry reserve position, remain favorable at or near historic highs.
- Carriers reported more than 45,000 claims and $260 million of incurred losses to date related to COVID-19 in the 38 NCCI jurisdictions. To date, approximately 95% of COVID-19 claims cost less than $10,000. However, the most severe cases—about 1% of claims—have generated 60% of the total reported COVID-19 losses.
- NCCI estimated that the COVID-19 event will add approximately two to three points to the overall 2020 accident year combined ratio.
- The workers compensation system experienced three COVID-19 claim reporting peaks—each reaching a high point of approximately 300 claims per day.
Len Herk, PhD
Executive Director & Senior Economist, NCCINadege Bernard-Ahrendts, FCAS
Practice Leader & Senior Actuary, NCCISean Cooper, FCAS, MAAA
Practice Leader & Senior Actuary, NCCI
Watch State of the Line Report Featuring Q&A