The National Council on Compensation Insurance (NCCI) has proposed an overall average workers' compensation voluntary market loss cost level change of -5.6 percent to become effective May 1st, 2019.
According to NCCI, the impact of change in experience and development was -6.0 percent and the impact of the change in benefits and loss-based expenses was +0.2 percent. The impact of trend was +0.0 percent.
Given the persistent soft market in Louisiana, companies could see a significant hit from this change. Troy Prevot, Executive Vice President of LCTA Workers' Comp, believes that the medical component of the NCCI method needs to be revised. “The formula they use centers around frequency,” Prevot said. “But it defies logic when medical costs continue to climb and climb. Combined ratios are exceeding 100 in some cases, and they're two years in arrears with the data.”
Frequency vs. severity is on the minds of many companies. Kelli Bondy Troutman, Director of Communications atLUBA Workers' Comp, said that the filing did not come as a surprise, especially given Louisiana's status as one of the safest jurisdictions in the country. “The NCCI loss cost filing is consistent with what we expected as claims frequency continues to trend downward,” she said. “This decrease in frequency has been significant enough to offset other factors, namely severity and increasing medical costs. This is an indication that employers are continuing to put a priority on workplace safety and are implementing effective loss control and accident prevention measures. The safety of Louisiana's workers is the most important thing in our industry so that is a great thing to see.”
Troutman also articulated the industry sentiment on the persistently soft market. “While decreased rates will further extend the soft market, continuing the extremely competitive climate we've been seeing, accident year loss ratios do seem to be steadily increasing, which is providing some stabilization.”
NCCI will discuss its filing and take questions at its annual State Advisory Forumon November 27th in Baton Rouge, but in the brief, (see link below) it provides an abbreviated list of rationales.
The filing is based on premium and loss experience for policy years 2015 and 2016, evaluated as of December 31st, 2017. Policy year 2015 shows improved loss experience when compared to the period evaluated as of December 31, 2016, and the Policy Year 2016 loss ratio is decreasing further.
Claim frequency continues to decrease since the increase in policy year 2010. The continued decrease in claim frequency supports current downward loss ratio trends.
After adjusting to a common wage level, both indemnity and medical average cost per case have remained relatively stable for Policy Year 2016.
Nina Luckman is the writer and editor of New Orleans-based Louisiana Comp Blog, which launched in 2014 and is sponsored by LCI Workers' Comp. She is originally from Pennsylvania but lived most of her life in Florida. Her credentials include a Bachelor's and a Master of Arts degree from Tulane University, both in the study of English Literature.
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