Boca Raton, FL – NCCI recently released a new Insights research brief that includes highlights from its annual review of frequency and severity trends for all NCCI states combined, with a focus on accident years 2011-2016.
NCCI monitors trends in workers compensation loss drivers, both on a countrywide and individual state basis. The source of the data is NCCI’s Statistical Plan, which contains detailed policy information that allows them to analyze frequency and severity by various claim characteristics.
To be consistent with financial information published by NCCI, the analysis excludes large deductible policies. NCCI also examined data including large deductible policies—and the trends are similar.
Overview of Changes in Frequency and Severity
Workers compensation has experienced a long-term decline in overall claim frequency. NCCI points to automation, robotics, and continued advances in safety as contributing factors. While total claim severity has increased, frequency declines have generally outpaced severity increases.
AY 2011-2016 Cumulative Changes
- Frequency: -19%
- Severity: +13%
These cumulative changes in frequency and severity above translate to annual changes of –4.2% and +2.5%, respectively, over the period of AYs 2011 to 2016.
The +13% cumulative increase in total severity is composed of a +16% change in medical severity and a +9% change in indemnity severity. In AY 2016, the average undeveloped cost of claims with lost wage benefits was approximately $39K. This figure is likely to develop upward before reaching its ultimate level.
Two potential contributing factors are changes in industry mix and changes in the share of claims involving lost wage benefits. Changes in industry mix have not been a significant contributor, accounting for about one point of the overall frequency decline and severity increase, respectively. Specifically, after controlling for changes in industry mix, the cumulative changes over the period in frequency and severity above become –18% and +12%, respectively. The share of claims involving lost wage benefits has remained stable over the period at about 25% of claims and over 90% of losses.
Click here for the full brief: NCCI Insights: Countrywide Trends in Claim Frequency and Severity