NCCI: Economy continues driving comp frequency, severity

Frequency continues to decrease while severity is still increasing, according to the latest figures from the National Council on Compensation Insurance. The analysis of countrywide claims valued as of Dec. 31, 2009, points to recession-driven statistics, according to experts.

From 2008 to 2009, lost time claim frequency decreased by 5.5 percent. This is consistent with the previous year's decline of 4.1 percent.

"The reports we've been hearing about it moderating have still pointed toward a decline," said Barry Lipton, practice leader and senior actuary at NCCI. "All of our research has pointed toward frequency going down during a recession. We will be getting data for 2010 soon, and we'll see whether the trends continue."

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Among specific states there was much volatility. For example, seven states saw frequency stabilize or increase. Maine reported increased frequency of 5 percent to 10 percent.

On the severity side, indemnity losses increased by slightly less than 1 percent. That follows an 8 percent increase the previous year.

"There are two reasons. One is wage increases were lower," Lipton said. "The change in the average weekly wage was minus 1 percent. It was the first minus in more than 15 years."

The other factor influencing indemnity severity also relates to the recession and its impact on certain industries. "Contracting and manufacturing have higher than average severity. The drop in economic activity is more concentrated in those areas," Lipton said.

While the average among NCCI's 37 states saw only the slight increase in indemnity severity, two states -- Kansas and New Hampshire -- reported increases of 10 to 15 percent. At the other end of the spectrum, 12 states reported indemnity severity remained the same or decreased by up to 15 percent.

Medical severity continued its upward trend although not at the double-digit rates reported 10 years ago. The average for medical severity from 2008 to 2009 was 5.4 percent.

"It's still hard to get used to medical [severity] not being 9 or 10 percent. Carriers have had an intense focus on medical costs and we're seeing them stabilizing," Lipton said. "The magnitude of the increase, although lower, is not good considering we are in a recession. It's still a big cost driver, but not at the scare level we had previously seen."

Nine states reported medical severity decreased between zero and 5 percent while 10 states reported increases of at least 10 percent.

Read more at the WorkersComp Forum homepage.

March 7, 2011

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