2021 State of The Line – NCCI Pandemic Analysis – Incredibly Fast Recovery
The NCCI pandemic analysis was quite a change of pace from the dire 2020 predictions for the Worker’s Comp markets. I decided to attend the 2021 NCCI Virtual State of The Line – both days.
The presentations were polished and well-prepared – good job by NCCI.
The time spent was well worth it. I was surprised at the level and speed of the economic and insurance recovery. Let us look at the numbers.
Statistics From The NCCI Pandemic Analysis
NCCI graciously included the presentation guide on their website. The appendices in the guide contained both a list of definitions and the formulas used in the presentations.
I mainly focused on the presentations by Donna Glenn, NCCI Chief Actuary, and Dr. Robert Hartwig from the University of South Carolina. Dr. Hartwig has long been one of my go-to researchers for how insurance relates to the economy and vice-versa.
From the guide –
The workers’ compensation Calendar Year 2020 combined ratio for private carriers was 87%. This is the seventh consecutive year that the workers’ compensation line of business has posted an underwriting gain.
Does that mean that during the pandemic carriers made a 13% profit? Not exactly. It does show that the Workers’ Comp market has been healthy for almost a decade.
Another interesting development from the guide –
Once the state fund premium is added in, the net written premium total is $42B, representing a 10% decrease from 2019.
The anticipated drop in premium turned out to be more of a large “blip” than a crisis. I was expecting at least a 20+% drop or more.
Nadege Bernard-Ahrendts, NCCI Practice Leader presented the data on COVID-19 claims. The total nationwide claims to date were much lower than anticipated at 45,000. As expected, the healthcare industry had the most claims. The frontline heroes took the brunt of the pandemic claims.
NCCI Pandemic Analysis – Dr. Robert Hartwig
The PowerPoint or PDF of Dr. Hartwig’s NCCI presentation can be found on this webpage. Search for The Economics of Work Comp and the COVID Effect (May 12th, 2021). Dr. Hartwig covered 60 slides in 4-5 minutes. The optimistic outlook was a shocker to me.
The info I had written down from his presentation (yes, on notebook paper) –
Insurance Impact –
- COVID-19 had a small impact on P&C Industry – (shocker!)
- The Combined Ratios were not affected
- The economy recovered much faster than anticipated, but it is extremely fragile (gas crisis?)
- Carriers’ investment income was much lower
- 20% of COVID-19 insurance losses were US-Based
- Europe has much more liberal Business Interruption interpretations
- Employers did a great job protecting employees – likely one of the main rapid recovery determinants
Economy Impact –
- $27.75 Trillion National Debt – Quarter 4 2021
- 2021 inflation – 3.3%
- Used car prices +10%
Pandemic Paradox –
- Payrolls reached an all-time high in 2020 – what???
- Wage increases were a major driver
- Women with schoolchildren – 40% of schools closed – unemployment driver
- Couch cash – $300 federal unemployment supplement – people were paid to stay home
- The stimulus did help the economy
- Savings rate in 2020 – 27,6% – what???
Federal Government Backing of Insurance Industry –
- Not recommended – would be massive government intervention
- No private insurer could handle back all the carriers
- PRIP (Pandemic Risk Insurance Program) not needed
- Insurance market vulnerabilities are manifest – wow!
Please follow the above links to The 2021 NCCI pandemic analysis. The was one of the better webinars that I have attended. As a consultant, I could not attend all the presentations. The client customer has priority.
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