NCCI’s Annual Insights Symposium (AIS) 2022—AIS Highlights Report Now Available
Boca Raton, FL (WorkersCompensation.com) - Experts from the National Council on Compensation Insurance (NCCI) shared a wide range of insights on how the workers compensation system is responding to workplace and workforce changes. The full AIS Highlights Report is now available.
NCCI shared its in-depth State of the Line Report and other research at its newly renamed Annual Insights Symposium 2022 from May 9 through 11 in Orlando, FL. Experts examined how catastrophe modeling works in workers compensation, the potential impacts of the Great Reshuffle on injury frequency, the implications of rapidly rising wages, and the threat of renewed medical cost inflation. Other speakers addressed inclusive leadership, the economics of workers compensation, and the latest thinking in artificial intelligence.
“The business environment is changing, and the pace of change is quickening, so the demand for insights has never been greater,” said NCCI President and CEO Bill Donnell. “NCCI is expanding its efforts to deliver timely and valuable insights to help keep the system healthy.”
Here are some highlights from NCCI's Annual Insights Symposium 2022:
Bill Donnell, CPCU, President and CEO, NCCI
The workers compensation system is remarkably strong and resilient. Stakeholders in the system can take pride in how the industry has responded during the past two years.
The business environment is changing, and the pace of change is quickening, so the demand for insights has never been greater. NCCI is expanding its efforts to deliver timely and valuable insights to keep the system healthy.
The workers compensation system is challenged to step up once again. That means using data more effectively and keeping the focus on serving injured workers and their families.
“Our industry must stay true to its noble responsibility: helping injured workers and their families. This is why we exist,” said Bill Donnell, President and CEO, NCCI.
Donna Glenn, FCAS, MAAA, Chief Actuary, NCCI
State of the Line Report
The workers compensation line is strong and healthy.
The system saw its eighth consecutive year of underwriting profitability with a calendar year combined ratio of 87, outperforming other property and casualty lines.
Net written premiums rose about 1% in 2021.
Lost-time claim frequency data suggests the long-term decline continues, despite a rise in frequency in 2021. Since 2019, frequency has declined slightly.
There is no change expected in medical and indemnity claims severity in 2021.
There are potential challenges ahead as medical costs could experience inflationary pressure.
Workers compensation reserves are robust. Reserves grew to $16 billion redundant as of year-end 2021.
“Strong employment and significant wage growth are fueling workers compensation payroll increases,” said NCCI Chief Actuary Donna Glenn. “We have a remarkably strong and healthy system right now.”
Nadege Bernard-Ahrendts, FCAS, Practice Leader and Senior Actuary, NCCI
The number of COVID-19 claims declined in 2021 with indemnity-only claims making up more than 50 percent of those claims.
Most COVID claims continue to be small. However, claims of more than $100,000 account for 1.2% of claims and 66% of losses. Nearly half of the most complex claims—those of more than $500,000—involved workers who died.
Healthcare workers remain the most impacted by COVID-19 even as the number of impacted workers in nursing/convalescent homes declined substantially in 2021.
“The pandemic continues to impact the workers compensation system. We expect the impact will continue to lessen in future years,” said Nadege Bernard-Ahrendts, Practice Leader and Senior Actuary, NCCI.
Katherine Williamson, FCAS, MAAA, Director, Data Science, NCCI
Workers Compensation Catastrophes: Past, Present, and Future
NCCI now defines a catastrophe as any single event with $50 million or more of workers compensation losses.
NCCI has concluded that the current catastrophe load in ratemaking is sufficient.
While uncertainty always remains, the system has a much greater understanding of pandemics and other extreme risks compared to two years ago.
“NCCI has taken a fresh look at how catastrophes figure into ratemaking for workers compensation in the wake of the COVID-19 pandemic,” said Katherine Williamson, Director, Data Science, NCCI.
Leonard F. Herk, PhD, Executive Director and Senior Economist, NCCI; and Carolyn Wise, ACAS, MAAA, Manager and Associate Actuary, NCCI
The Great Reshuffle
Today's labor market has more short-tenured workers, more remote workers, and a different industry mix of employment than before the COVID-19 pandemic.
Short-tenured workers have a higher frequency of job-related injuries than full-tenured workers, and the difference in injury rates varies greatly across industries.
Remote workers appear to have a lower frequency of job-related injuries than on-site workers, and this difference appears not to vary across industries.
Changes in the industry mix of employment—especially employment shifts between lower and higher severity classes—can have complex effects on aggregate frequency.
“While there are more short-tenured workers on the job today than two years ago, there were a lot of short-tenured workers even before the COVID pandemic,” said Leonard F. Herk, Executive Director and Senior Economist, NCCI.
“The Great Reshuffle may lead to short-term frequency anomalies. However, it is not likely to cause a turn in the long-term frequency trend,” said Carolyn Wise, Manager and Associate Actuary, NCCI.
Sean Cooper, FCAS, MAAA, Practice Leader and Senior Actuary, NCCI; and Raji Chadarevian, Director, Medical Regulation and Informatics, NCCI
The Medical Dilemma
Medical inflation in workers compensation has been moderate for the past decade. But with the recent dramatic rise in consumer prices, concerns have emerged about medical inflation.
Changes in medical claims costs are driven by two factors: the price of medical services and utilization, which measures the mix and number of services provided to an injured worker.
NCCI's most recent data shows drug costs are declining, physician costs are up slightly, and facility costs are rising in the workers compensation system.
“While general inflation is up, workers compensation medical trends have been moderate and the forecast remains relatively moderate in the near future,” said Sean Cooper, Practice Leader and Senior Actuary, NCCI.
“Prices are only half the story. Prices matter. Utilization matters also,” said Raji Chadarevian, Director, Medical Regulation and Informatics, NCCI.
Robert P. Hartwig, PhD, CPCU, Clinical Associate Professor of Finance, Darla Moore School of Business, University of South Carolina
Top 5 Ways COVID Changed the Economics of Workers Compensation—For Better or Worse
Despite many analogies, today's economy and operating environment for insurers couldn't be more different from the late 1970s to early 1980s.
The “R” word: Recession is increasingly likely but still avoidable.
Extreme volatility in the investment environment is both an opportunity and a concern for insurers, especially in long-tail lines such as workers compensation.
The economic reverberations from COVID will last years beyond the end of the pandemic itself.
“Economic uncertainty has Wall Street climbing its proverbial ‘Wall of Worry,' and P/C insurers are along for the ride,” said Robert P. Hartwig, Clinical Associate Professor of Finance, Darla Moore School of Business, University of South Carolina.
Roger Ferguson, former President and CEO, TIAA; former Head of Financial Services, Swiss Re; and former Vice Chairman, Federal Reserve System
Empathy may be the most important leadership trait. To get people to follow you, they have to know you. Empathy is a force multiplier for leadership.
Crisis situations require leaders to show fortitude, leverage experts in the business, demonstrate empathy, and have clarity about goals.
To attract talented young people to insurance, start with the mission of insurance. We make the world a better place. Help prospective employees understand the link between the technical aspects of insurance products and how we actually improve people's lives.
He forecasts that the potential for a recession is high but anticipates it may be relatively mild and short in duration.
“Research shows that teams that are more diverse and inclusive get better results,” said Roger Ferguson, former President and CEO, TIAA; former Head of Financial Services, Swiss Re; and former Vice Chairman, Federal Reserve System. “It's not just about having diversity; you also need inclusion. Diversity is getting invited to the party. Inclusion is getting asked to dance.”
James Guszcza, Research Affiliate, Center for Advanced Study in the Behavioral Sciences, Stanford University
Human Factors: Expanding the Science of Predictive Analytics and Artificial Intelligence (AI)
Human-machine hybrid intelligence is a better framework to guide practice than “AI.”
The focus of hybrid-intelligence design is real-world results, not machine outputs.
Hybrid-intelligence design goes beyond machine learning to take into account human values, needs, and relative cognitive strengths and limitations.
“Without smart design, machine learning can result in artificial stupidity rather than artificial intelligence,” said James Guszcza, Research Affiliate, Center for Advanced Study in the Behavioral Sciences, Stanford University.