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© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
2014 Annual Issues Symposium
OPENING REMARKS: 2014 Industry Observations and Outlook Stephen J. Klingel, CPCU, WCP NCCI President and Chief Executive Officer
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
Checklist of High Profile Topics
Top Line Numbers
Defining the Market Condition
Adapting for Success in a Changing Environment
External Pressures
The Realities of Improved Data
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
Workers Compensation Underwriting Results Improved Again
Private Carriers
115
108
101
100
105
110
115
120
2011 2012 2013p
Percent
p Preliminary
Source: 1990–2012, Annual Statement Data; 2013p, NCCI
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
-4.5
-6.9
-4.5 -4.1 -3.7
-6.6
-4.5
-2.2
-4.3
-5.9
10.5
-4.0
-6.1
-2
3.5
-1.0
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013p
IndicatedAdjusted*
* Adjustments primarily due to significant changes in audit activity
2013p: Preliminary based on data valued as of 12/31/2013
2000–2012: Based on data through 12/31/2012, developed to ultimate; excludes high deductible policies
Average frequency for the states where NCCI provides ratemaking services, excluding WV; including state funds
Frequency is the number of lost-time claims per $1M pure premium at current wage and voluntary loss cost level
Percent
Accident Year
Workers Compensation Lost-Time Claim Frequency
Downtrend Continues
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
Percent Change
Changes in Workers Compensation Claim Severity
2
3
-4
0
4
8
12
16 Change in Lost-Time Indemnity Claim SeverityChange in Lost-Time Medical Claim Severity
2013p: Preliminary based on data valued as of 12/31/2013
1991–2012: Based on data through 12/31/2012, developed to ultimate; excludes high deductible policies
Average severity for the states where NCCI provides ratemaking services, including state funds; excluding WV
Accident Year
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
Top Line Industry Numbers
Frequency -2%
Indemnity +2%
Medical +3%
Combined Ratio 101%
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
Defining the Current Market Condition
Balanced Optimistic
Disappointing
Negative
Tenacious
Resilient
Discouraging Promising
Cautious Bright
Dynamic
Pessimistic
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
Percentage Difference Between Individual Carriers and Statewide Average
-50.0% -25.0% 0.0% 25.0% 50.0% 75.0%
Finding the Average
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
Percentage Difference Between Individual Carriers and Statewide Average
-50.0% -25.0% 0.0% 25.0% 50.0% 75.0%
Indicated Loss Cost Changes for Individual Carriers Can
Differ Greatly from Statewide Average
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
-50.0% -25.0% 0.0% 25.0% 50.0% 75.0%
Indicated Loss Cost Changes for Individual Carriers Can
Differ Greatly from Statewide Average
Percentage Difference Between Individual Carriers and Statewide Average
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
External Factors Can Quickly Tip Results…
TRIA Renewal
Health Care Environment and ACA
State-Based Decisions - FL Morales Case
Other Factors
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
A Critical Tool—Largely Underused
“Insurers actually process only about 10% to 15% of available data”
Ernst & Young
“The amount of new digital data increases 40% annually and insurers large and small are looking for ways to benefit from it”
McKinsey and Company
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
Changing Dynamics
Success will increasingly be based on the ability to rapidly understand and leverage the burgeoning amount of available data.
Today, US property/casualty insurers have access to a rapidly expanding volume of data from transactions, claim histories, social media connections, internet searches and even GPS-type devices.
New opportunities ahead for those who can leverage the use of Predictive Modeling, Big Data, and other advanced analytics.
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
Improved Data Analysis Allows Industry to Remain Nimble and Responsive
Improved Loss Forecasts
Improved Claims Management
Improved Underwriting
Reduced Costs and More Accurate Pricing
Early Detection of Adverse Claim Developments
Ability to Tailor Products, Services, and Information to Specific Customer Segments
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
New World Has Risks As Well as Opportunities
To succeed you’ll need to master the following concepts:
Data Stewardship
Information Security
Accountability
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved. © Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
Data Stewardship
Who Owns the Data?
Internal Controls
Internal Governance
Validating Conclusions
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
Information Security
How Sensitive is the Data?
Gathered Internally
Acquired Externally
Contains Personal or Health Information?
Are there Inherent Usage Restrictions?
Your security is only as strong as your weakest link (which may not even reside in your company)
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
Accountability
You have a clear responsibility to use data properly
Invalid conclusions could sink even your best strategies
The importance of data is changing roles in companies
Data strategies are moving to the front lines
Don’t forget the back office – you need them to maintain governance, quality standards, usage guidelines, etc.
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
Remaining Competitive
Understand the Environment
Adjust Operations to New Realities
Embrace Entrepreneurial Opportunities
Remain Mindful of Stewardship Role
© Copyright 2014 NCCI Holdings, Inc. All Rights Reserved.
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