The 72’nd Annual Workers’ Compensation Educational Conference – Orlando

Another year and another convergence of the who’s who in the field of workers’ compensation at the Marriott World Center in Orlando this week.  Known as the largest insurance conference in the country, the Workers’ Compensation Institute brings together “centers of influence” in law, medicine, claims adjusting, underwriting, brokerage, risk-bearing, managed care, regulation, legislation, staffing and of course coemployment.

Dating back over a decade, the Workers’ Compensation Institute and specifically Jim McConnaughhay and Steve Rissman have granted the PEO community a one day educational track.  Shortly thereafter, FAPEO and NAPEO threw their influence and sponsorship behind it.  Special thanks to the WCI, FAPEO and NAPEO for making this a success and bringing positive exposure to the PEO industry.

I am proud to participate on a panel Tuesday morning at 9:00 am with Andy Olwert (Next Level), Deb Hetzer (PEMCO), Phil Herron (Continuum HR) and Robert Barrett (Rissman, Barrett, Hurt, Donahue, McLain & Manganese’s, PA) titled “Accountability in the PEO Industry – Posting Wins for PEO’s and Their Claims Teams”.  More information on this data-driven session can be found on the WCI 360 site here:

http://www.wci360.com/conference/professional-employer-organization-breakout

Hope to see you Thursday morning and look forward to catching up with lots of old friends!

California Adopts 16.5% Workers’ Compensation Rate Drop for 7.1

From the Insurance Journal…

http://www.insurancejournal.com/news/west/2017/05/22/451841.htm

California chose to adopt the Workers’ Compensation Insurance Rating Bureau’s (“WCIRB”) recommendation of a -16.5% drop in pure premium rates.  It should be noted that these rates are advisory only and so what to watch next is who adopts the pricing decrease and who does not.  With over 30% of all US workers’ compensation premiums generated out of California, this will provide an intriguing battleground and opportunity for those carriers that buy into WCIRB’s numbers in regard to lower medical loss development, decreasing indemnity claim frequency, and lower than projected loss adjustment expenses.

– Paul R. Hughes

 

2016 Workers’ Compensation Combined Ratio is a 94 per NCCI

It has been a busy month of conventions… NAPEO Legal and Legislative, RIMS and last week the NCCI.  On the ground at the PACE conference in New Orleans, a look back at the NCCI AIS.

The National Council of Compensation Insurance (“NCCI”) Annual Issues Symposium is the preeminent conference for understanding all things workers’ compensation.  Industry experts in the carrier, reinsurance and brokerage communities converge in Orlando every year in May to better understand the meaningful trends in the workers’ compensation line of insurance. The most meaningful number of this year’s event was 94… the lowest combined ratio of any other year since 1990 with the exception of 2006 (93).  It should also be noted that this is a 6 point drop from the 100 of last year and represents one of few years <100.

Based on typical patterns, this is now where capital enters the market… which was illuminated when the NCCI literally sold out of tickets.

With NAPEO’s Legal and Legislative Conference two weeks ago, the NCCI conference last week and PACE in New Orleans this week… it has been a high school reunion of sort – seeing good friends, telling old stories and commiserating on how to make the PEO industry the optimal platform for American business.  Health insurance maybe in the news every day but workers’ compensation is the line of business that PEO’s must have.

The origination of the PEO Compass was to provide an executive summary of all things workers’ compensation and how they impact all things PEO.  The NCCI is a huge driver of this nationwide and sets rates and rules in 37 states.  The document attached is a must read for those like me that are workers’ compensation and data geeks.

https://www.ncci.com/Articles/Documents/II_AIS2017-SOL-Guide.pdf

For those that are not (or would prefer not going through 57 slides), the highlights below:

  • The total P/C industry’s 2016 combined ratio (101%) represents a three-point increase versus that for 2015.
  • Combined ratios increased in all lines of business except workers compensation (slide 4)
  • Premium for the NCCI-serviced Residual Market Pools has remained stable over the last four policy years, at approximately $1.1 billion. (slide 12)
  • Between 2015 and 2016, countrywide private carrier direct written premium grew +2.4% (slide 15)
  • The percentage change in payroll (+4.5%) is approximately equal to the percentage change in the average wage (+2.5%) plus the percentage change in employment (+1.9%).  Employment grew at an above-average rate for the Professional and Business Services; Education and Health Services; Construction; and Leisure and Hospitality sectors.  Employment in the Manufacturing sector was flat, while the All Other sector posted a decrease primarily due to declines in Natural Resources and Mining employment (slide 17)
  • NCCI workers’ compensation filings with effective dates in 2017 averaged –6.7%… California and New York are already seeking approval for rate decreases which are not even part of this data set (slide 18)
  • In 2013, more than 70% of respondents saw an increase in premium at renewal, but by the fourth quarter of 2016, 62% reported seeing a decrease in premium at renewal (slide 23)
  • The workers compensation 2016 calendar year combined ratio for private carriers was 94%. This is the second consecutive year that the industry has posted a six-point underwriting gain. Consecutive combined ratios at this level have not been seen in at least the last 30 years (slide 24)

What this means is that workers’ compensation has become a very sexy line of insurance risk-bearers.  With favorable improvements in operating and investment performance, the median expected rate of return is +20%.  Again, it is therefore no surprise that this years NCCI AIS conference was sold out months prior to the event.

For those that happen to be in New Orleans this week for the annual PACE conference, let’s meet up and strategize in person about the great opportunities ahead for the industry.

– Paul R. Hughes

c: 321.217.7477

e. phughes@libertateins.com

 

 

New York Workers’ Compensation Rates Expected to Fall 4.5%

Mr. Cuomo has committed to a workers’ compensation “business process reengineering” aimed at increased efficiencies in the overall system.  This from the Insurance Journal today.

At the same time, improvements in medical delivery is also part of the budget in areas such as:

  • Expanding the safety net for seriously injured workers, so more are eligible to apply for reconsideration for lifetime benefits when their benefit caps are set to expire.
  • Ensuring injured workers who are out-of-work and not receiving benefits will get a hearing within 45 days.
  • Providing relief for first responders exposed to extraordinary stress in emergency situations.
  • Strengthening the administrative tools available to the Board in its efforts to provide swift and appropriate delivery of benefits to injured workers.

If the recommendation from the New York Compensation Insurance Rating Board is approved (which is likely), the new rates will take effect on 10.1.17.

  • Paul R. Hughes

New York Board Proposes 4.5% Workers’ Compensation Rate Decrease

New York businesses could soon see some slight relief in workers’ compensation premiums, according to an announcement from Gov. Andrew M. Cuomo.

The governor’s office released a statement Monday saying that the New York Compensation Insurance Rating Board, a non-governmental rate service organization, has submitted an overall workers’ compensation rate decrease of approximately 4.5 percent for rates beginning Oct. 1, 2017. If approved, the premium decrease equates to a savings New York employers about $400 million this year in workers’ compensation premiums.

In its rate filing, CIRB attributed the reduction in premium rates to certain cost savings measures passed as part of the 2018 budget and general system savings spearheaded by the New York State Workers’ Compensation Board, according to the governor’s statement.

“The reforms to the Workers’ Compensation system in this year’s budget will help New York businesses cut costs – enabling them to further reinvest, grow and create more jobs across the state,” Cuomo said. “With this rate decrease, New York is providing real savings to businesses helping to make them more competitive while strengthening protections for injured workers at companies across the state.”

The rate submission must still be reviewed and approved by the Department of Financial Services. If approved it would become effective October 1, 2017.

New York Senate Majority Leader John J. Flanagan said workers’ compensation reforms were part of the budget negotiations earlier this year.

Workers’ compensation premium rates are determined on an annual basis and take into account recent claims experience as well as implementation of any new policies and procedures. The 2018 New York Budget specifically addresses cost by applying limits to temporary disability payments prior to a permanency award, while providing an exemption process for the most seriously injured.

“Governor Cuomo and the Legislature have successfully managed to rebalance the workers’ compensation system to provide better protections for injured workers and provide much needed relief to New York’s businesses,” said Kenneth J. Munnelly, chair of the Workers’ Compensation Board.

The budget also includes better protections for injured workers by:

  • Expanding the safety net for seriously injured workers, so more are eligible to apply for reconsideration for lifetime benefits when their benefit caps are set to expire.
  • Ensuring injured workers who are out-of-work and not receiving benefits will get a hearing within 45 days.
  • Providing relief for first responders exposed to extraordinary stress in emergency situations.
  • Strengthening the administrative tools available to the Board in its efforts to provide swift and appropriate delivery of benefits to injured workers.

The budget requires the Workers’ Compensation Board to publicize new permanent impairment guidelines to reflect advances in modern medicine that result in better outcomes. Additionally, to ensure that injured workers receive high quality, cost effective medications, the board will establish a prescription drug formulary.

According to the governor’s office, the reforms build on his continued commitment to improve New York’s workers’ compensation system to more effectively serve the needs of injured workers and employers.

Signed by the Cuomo as part of the 2013-14 budget, the Business Relief Act provided hundreds of millions in savings for New York businesses by fundamentally restructuring the way that workers’ compensation assessments were made.

Cuomo also launched a comprehensive “business process re-engineering” to re-imagine the workers’ compensation system. As part of that effort, the Workers’ Compensation Board is close to launching virtual hearings, which will modernize and virtualize the Board’s present hearing environment and allow injured workers to participate in a hearing at a location that is most convenient for them, even their home, the statement said.

In addition, the Workers’ Compensation Board has developed new processes to ensure benefits are delivered more timely by utilizing alternative means to resolve disputes. This allows the board to preserve hearing time for more complex cases with legal disputes. The board has also generated a dramatic decline in inventory of pending workers’ compensation appeals and the length of time it takes for those appeals to be resolved. The prompt processing of appealed claims aids both workers and employers, by making benefits and treatments available more quickly and lowers litigation costs.

Source: New York Office of the Governor

Florida Workers’ Compensation Rates – So Now What?

As has been reported, the NCCI has requested a dramatic 19.6% workers’ compensation rate increase from the State of Florida to cover necessary pricing as a result of 2 recent court rulings and the adoption of a new Florida fee schedule.

So what now?

The State of Florida has the final say on workers compensation rates.  In Florida, all carriers must use the same base manual rates as approved by the State(usually on a per annum basis).  This is unlike other states where carriers can file for their own loss cost multipliers (LCM’s), and within the confines of what a given State will allow, therefore set their own rates.   LCM’s are multiplied by expected loss costs in a given state to get a final base rate.  The burden to make sure base rates are adequate therefore fundamentally shifts from the insurers to the Florida Office of Insurance Regulation with the guidance and recommendation of the NCCI.

While it is highly unlikely, the State is well within their rights to adopt no rate increase and then it is up to the carriers that write business in the State to decide if they can make money here or not.

The OIR has scheduled a town hall hearing in Tallahassee on August 16’th, 2016 at 9:00am.  After this meeting, there is no specific time frame whereby the OIR needs to accept revise or reject the NCCI recommendation.  It is my guess that the State will move swiftly as the effective date of the proposed rate filing is 10.1 (which the OIR could also revise as deemed fit).

So for now, the numbers and impact will be argued as to the need of this sharp increase. Good chance the State could get a “second opinion” in some manner to that of the NCCI as they have done in the past.  Many legislators will be rallied to help reduce  the heavy impact this type of a rate hike will have on small business in Florida.

Politics and mathematics.

More as we get it – Hope you had a Happy 4’th…

-PRH

 

The American International Group (“AIG”) Decision

Bar none, there has been no more innovative and successful organization in the property and casualty insurance realm then AIG.  The following headline today:

AIG Chairman Defends Keeping Both Life and P/C Insurance Units – Insurancejournal.com

…amazes me to even be in consideration.  AIG did not just distribute the most product, they created the most.  Their entities provide the largest amount of “excess and surplus” (aka non-admitted) capacity then any other insurer times three in the country.

Not a life guy, so admittedly come from a position of not understanding how anyone with a right mind would ever consider selling the crown jewel of AIG – their property and casualty insurance portfolio.  It seems “investor activists” such as Carl Icahn have a different take:

“Icahn Renews Attack on AIG CEO Hancock; Insists ‘Drastic Shift’ Needed”

http://www.insurancejournal.com/news/national/2016/01/19/395397.htm

Icahn Renews Attack on AIG CEO Hancock; Insists ‘Drastic Shift’ Needed

Activist investor Carl Icahn has again called for American International Group (AIG)  to be divided into three separate companies and expressed doubt that AIG CEO Peter Hancock’splanned strategy presentation next week will satisfy his demand.

He said that if Hancock “fails to present a drastic strategic shift and instead is limited to only incremental changes such as small-scale asset sales and incremental cost cutting” then what “little credibility management now has will be lost.”

Icahn says the split would let AIG to “shrink below the threshold for systemically important financial institutions” (SIFI) and avoid SIFI-related regulatory restrictions.

“[I]t is abundantly clear to me there is only one sensible path for AIG to follow: become a smaller, simpler company with a path to de-SIFI,” he said in a letter on his website. – Carl Icahn

So the greatest insurer in the past century has to disband its units because the federal government has given it the equivalent of the “franchise tag” in the NFL.  Really man?

Let’s look at their numbers…

AIG Consolidated Operating Financial Highlights ($ in Millions, Except per Share Amounts) 1Q15 1Q16 Inc. / (Dec.)

Operating revenues $14,590 $12,737 (13%)

Pre-tax operating income (loss):

Commercial Insurance: Property Casualty 1,170 720 (38%)

Mortgage Guaranty 145 163 12%

Institutional Markets 147 6 (96%)

Total Commercial Insurance 1,462 889 (39%) “…the p and c side”

Consumer Insurance: Retirement 800 461 (42%)

Life 171 105 (39%) Personal Insurance (26)

222 N/M Total Consumer Insurance 945 788 (17%) “…the life side”

Total Insurance Operations 2,407 1,677 (30%)

and today’s article out of the journal.,,,

Breaking up AIG is a huge mistake as well as continuing to drill the current CEO.  How does one run a company when he is is constantly under seige… They have already lost many top execs recently such as John Doyle (Marsh) and Russell Johnston (QBE) whom I amagine had to be frustrated with more time spent defending the company versus advancing it.  These two Industry stalwarts, with the help of course of their colleagues, allowed AIG the second chance in this writer’s opinion and to see them leave and press like this is saddening.  Let’s hope Icahn gets bought out…

-PRH

By Sonali Basak and Emma Orr( | May 12, 2016 

American International Group Inc., which is shrinking under pressure from activist investors, is committed to retaining operations in both life insurance and property/casualty coverage, Chairman Doug Steenland said.

“We remain of the view that that is the right long-term position for AIG,” Steenland said Wednesday at the company’s annual meeting in New York. “Although, the specific components of what’s in each of those businesses may change.”

Billionaire Carl Icahn said last year that AIG is too big and should split into separate companies. Chief Executive Officer Peter Hancock instead is selling smaller units as part of a plan to free up $25 billion in capital to be returned to shareholders over two years. That has helped ease tension with activists including John Paulson, who was elected to the insurer’s board Wednesday along with a representative of Icahn’s firm.

Hancock reached a deal in January to sell a broker-dealer operation, and AIG’s mortgage insurance unit filed in March for an initial public offering. The CEO has also been cutting jobs.

“This is hard and sometimes painful work,” he said at the meeting. “We have much left to accomplish.”

AIG advanced 14 cents to $56.49 at 12:15 p.m. in New York. That compares with the closing price of $60.92 on Oct. 27, the day before Icahn disclosed a stake in the insurer and publicly called on Hancock to break up the company.