CASUALTY ACTUARIAL SOCIETYRATEMAKING SEMINAR

March 11 – 12, 2004

New York Workers CompensationRatemaking & Other Issues

Martin G. Heagen, CPCU, WCCP

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

• Loss Ratio Projections• Trend• Classification Pricing• Rate Filing History• Individual Risk Pricing• Unique New York Issues

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

Ultimate Loss Ratios

Incurred Method

Paid Method

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

Est

. Ult

. Los

s R

atio

1994 1995 1996 1997 1998 1999 2000 2001

Policy Year

Incurred

Paid

Ultimate Indemnity Loss Ratios

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

0.1

0.15

0.2

0.25

0.3

0.35

0.4

Est

. Ult

. Los

s R

atio

1994 1995 1996 1997 1998 1999 2000 2001

Policy Year

IncurredPaid

Ultimate Medical Loss Ratios

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

Trend

Claim Frequency

Claim Cost

Loss Ratio

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

02468

101214161820

Freq

uenc

y

1994 1996 1998 2000 2002(est) 2004(?)

Policy year

Indemnity Claim Frequency (Claims per $1 M Premium at Present Rates)

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

0

10

20

30

40

50

60

Fre

quen

cy

1994 1996 1998 2000 2002(est) 2004(?)

Policy year

Medical Claim Frequency(Claims per $1 M Premium at Present Rates)

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

0

5000

10000

15000

20000

25000

30000

35000

Cla

im C

ost

1994 1996 1998 2000 2002(est) 2004(?)

Policy Year

Average Indemnity Claim Cost

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

0

1000

2000

3000

4000

5000

6000

Cla

im C

ost

1994 1996 1998 2000 2002(est) 2004(?)

Policy year

Average Medical Claim Cost

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

• 9 Industry Groups

- Food & Beverage Mfg.

- Chemical Mfg.- All Other Mfg.- Contracting- Stores & Dealers- Prof. & Office- Services- Miscellaneous-Maritime, Admiralty, Federal

Classification Ratemaking

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

• Industry Group Differentials• 5 Years of Data Irrespective of Class Size• 9/11/2001 Losses (Cat 48) Excluded• Class Credibility Based on Losses, Separately for

Serious, Non- Serious & Medical• Class Changes Limited To +/- 25%

Classification Ratemaking Continued

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

-20

-15

-10

-5

0

5

10

% R

ate

Lev

el C

hang

e

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Calendar year

Historical Rate Level Changes

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

02468

1012141618

% B

elow

Man

ual R

ate

Lev

el

1992 1994 1996 1998 2000 2002

Calendar Year

DeviationsDividendsTotal

Individual Risk Pricing

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

Unique New York Issues

3rd Party Liability (Dole vs. Dow)

Section 110- Small Claims

Total Medical Costs Less Than 40% of Total losses

Last Benefit Change - 1992

Duration of Permanent Partial Claims

9/11/2001 Effect

Special Funds Assessments

Payroll Limitation For Construction Classes

CAS RATEMAKING SEMINARNEW YORK WORKERS COMPENSATION

New York Workers Compensation

Ratemaking & Other Issues

Questions & Answers