US Combined Ratio Falls Even Further to Historic Lows
US Combined Ratio Results
The US had its best Combined Ratio last year since the 1950s and is improving even more. The current Combined ratio is .89 nationwide.
I first heard about the incredibly low ratio at NCCI’s Virginia Advisory Meeting in September of this year. The Combined Ratio for 2016 was .94. The ratio remains under 100% for more than three years.
The last time that carriers experienced a Combined Ratio this low was .93 in 2006.
NCCI predicts the Combined Ration will be even lower for 2018 = .88. Usually, the Combined Ratio will “bottom out” with a low figure then increase to a higher level. Two years of incredibly low Combined Ratios look great for any comp-only carrier or any carrier that writes WC coverage.
See the chart below for Combined Ratios over the last 20 years.
For many years, the other lines of coverages – think General Liability, Property, Errors, and Omissions- contained enough profit to cover the terribly high combined ratios of 1.1 or higher.
Let’s stop and put that into perspective. The Combined Ratio is calculated by dividing losses by earned premium or
Losses + Expenses / Earned Premium
or in basic form
Funds Carriers Paid Out / Funds Carrier Took In
$40.1 Billion net written premium in first six months of 2018. State Fund’s share of written premium has shrunk. 0% change in net written premiums. Payroll is still the main driver in premium changes. Rates and Loss Costs = -10%. Claims frequency has fallen while being offset by a moderate increase in claims cost.
South Carolina Result
The South Carolina payroll figures are comparable to the US. South Carolina’s combined ratio was .97 for 2017.
This equates to an 11% profit on Workers Compensation nationwide or a 3% profit margin for South Carolina.
Carriers presently not able to provide more significant discounts as in the past due to their internal ROI is presently lower.
Loss reserve analysis – look this up online.
In 2016 – 2017 SC loss frequency fell by 6%. Indemnity claim severity increased 4%. Medical claim severity increased 4%.
Frequency decreased 2% for SC in 2015 and 2016.
SC does not have a burn center. There were three to four severe burn claims that experienced out-of-state fees that are not covered by a fee schedule as the injured employees had to be treated outside of SC.
SC NCCI recommended 9.2% decrease for 4-1-19 loss cost filing.
SC Change in Experience of 8.3% was responsible for most of the recommended loss cost decrease.
SC Legislative Issues – A few Opt Out bills were introduced by the Legislature but nothing happened with them. The bills were based on the Texas Opt Out Model
Other NCCI Information
US – 844 bills introduced that were WC related, 474 were NCCI states, 94 bills were enacted – 111 first responder bills.
NCCI also covered:
- South Carolina and National Residual Marketplace
- Marijuana
- Opioids
One survey question that caught my eye at the end of the Advisory Forum consisted of asking whether or not an in-person Forum or a webinar would be preferable. This leaves one to think that NCCI may be heading to webinar-based Forums.
The November 29th NCCI State Advisory Forum slides are here. The file is a PDF. I recommend taking a few minutes and reading up on the US and South Carolina statistics including the Combined Ratio.
Read More: Combined Ratio Difference Debate – Calendar vs. Accident Year
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