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North Carolina Rate Bureau Presentation to The Appalachian State
Presentation to: The Appalachian State University’s Brantley Risk and Insurance Center Worker’s Compensation Symposium North Carolina’s Worker’s Compensation System Today: Is the compensation bargain still working for both employers and employees in our state? The Rate Bureau’s Role in the WC Bargain. Promulgate and propose rates for loss costs and residual market rate filings. Administer the “difficult to place” assigned risk plan for employers. Maintain a compendium of employers refused voluntary coverage. Promulgate and propose rules, policy forms and rating plans for WC policies. The North Carolina Insurance Guaranty Association Experience with WC claims. Have paid more than $145 million in WC claims. Have participated in the claims adjusting process through the Supreme Court. The Bargain …every employer and employee…shall be presumed to have accepted the provisions of this Article respectively to pay and accept compensation for personal injury or death by accident arising our of and in the course of his employment…NCGS 97-3 Every employer subject to the compensation provisions of this article shall secure the payment of compensation to his employees in the manner hereinafter provided…NCGS 97-9 Every employer subject to the provisions of this Article relative to the payment of compensation shall either: (1) Insure and keep insured his liability under this Article in any authorized corporation…or (3) Obtain a license from the Commissioner of Insurance (to self insure their workers compensation obligations)…NCGS 97-93 (a) The rates charged by all carriers of insurance…shall be fair, reasonable, and adequate. NCGS 97-100(a) We see the Rate Bureau’s part in the bargain as providing one of the mechanisms for the employer to “secure payment of compensation to his employees.” There are two parts to this, establishing rules, forms and loss costs for use in pricing and policy issuance for the voluntary market and the administration and pricing of the assigned risk program. Are we holding up our end of the bargain? Are loss costs and rates appropriate? Are “difficult to place” employers receiving what they need from the Assigned Risk Plan? Are loss costs and rates appropriate? 2001 2005 2009 Loss Costs/Rates Loss Costs/Rates Loss Costs/Rates -1.4% +5.2% +9.4% +8.7% -9.6% 0.0% 2002 2006 Average Change Loss Costs/Rates Loss Costs/Rates Loss Costs/Rates 0.0% 0.0% +7.3% +7.6% +0.8% +4.5% 2003 2007 Accumulated Loss Costs/Rates Loss Costs/Rates Change Loss Costs/Rates -1.0% +5.0% +1.6% +4.1% +7.3% +40.8% 2004 2008 Loss Costs/Rates Loss Costs/Rates +2.0% +5.0% -4.4% -3.8% Are difficult to place employers receiving what they need? Policy count and premium declining: 37,000 and $95,000,000 in 2007 30,000 and $72,000,000 in 2008 25,000 and $55,000,000 in 2009 21,000 and $42,000,000 in 2010 (estimate) Largest classes remain constant: Carpentry, detached 1 or 2 family Charitable or welfare organizations Carpentry, interior Painting or paper hanging Nursing, home health, public and traveling Average premium declining: $2600 2007 $2400 2008 $2300 2009 $2000 2010 (estimated About 82% of applications are received electronically. Factoids from current data. It is more expensive for carriers to issue policies: +2% for other acquisition expense +3% for loss adjusting expense uncollectible premiums are higher Percentage of indemnity vs. medical claims payments are different in NC than countrywide: Countrywide indemnity claims are 42% of claims payments and medical claims are 58%. In North Carolina indemnity claims are 52% of claims payments and medical claims are 48%. The trend for claims (severity, frequency) is -1.5% for indemnity and +0.5% for medical. Five year loss development is somewhat lower than originally anticipated. Issues The data being prepared for the required September 1, 2010 filing for WC suggests: Voluntary loss costs +1-2% Residual market rates +5-6% Aggravated inequities. Minimum premiums. Contentious claims process. Experience modifications.
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