WORKERS’ COMPENSATION – NEW YORK

WORKERS' COMPENSATION ? NEW YORK 2019 CLASSIFICATION EXPERIENCE

New York Compensation Insurance Rating Board 733 Third Avenue New York, NY 10017 Tel: (212) 697-3535

2019 CLASSIFICATION EXPERIENCE - NEW YORK

The New York Compensation Insurance Rating Board (NYCIRB) derived the 2019 classification pure premiums in accordance with a class ratemaking methodology which was approved for use by the Department of Financial Services in 2015.

This NYCIRB compiled classification experience using the latest available five policy years of experience, with the incurred losses modified by loss development factors, law amendment factors, excess loss factors, together with the indicated, underlying, and formula pure premiums.

Note that the experience for Maritime classifications was grouped by type of operation, and the combined experience is shown under the Program I Maritime class codes.

A. BASIC DATA

The basic data for the five policy years are from the New York Workers Compensation Statistical Plan excluding the experience of self-rated risks. The report level for each year is listed as below:

Policy Year 2012 Report Level Fifth

2013 Fourth

2014 Third

2015 Second

2016 First

The experience of the five policy years has been developed to an estimated ultimate reporting basis by factors reflecting the development of both payrolls and losses. For purposes of loss development, the methodology categorizes the claims into Likely-to-develop and Not-Likely-toDevelop, separately for indemnity and medical. The claim categorization depends on three claim characteristics: injury type, body part, and the claim status at the first report level. In addition, each claim is limited at $500,000 and loss development factors are derived using limited losses. The loss development factors appear below:

PY 2012 2013 2014 2015 2016

Loss Development Factors

Indemnity

Likely

Not Likely

1.1800 1.2280

1.1000 1.1330

1.3470

1.2280

1.6880

1.4390

2.7870

1.9600

Medical

Likely

Not Likely

1.2890

1.1390

1.3430

1.1670

1.4610

1.2170

1.7110

1.2840

2.3060

1.4050

The incurred losses have been adjusted to eliminate excess amounts on catastrophe and high cost cases. The experience excludes a-rated classifications, discontinued classifications without assignment to other classifications and classifications with insufficient experience.

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The incurred losses have been trended to the midpoint of the prospective pricing period, using the 2018 approved trend factors. The annual loss trend factors with wage trend are .998 for indemnity and .972 for medical. The products of loss development factors and trend factors appear below:

PY 2012 2013 2014 2015 2016

Development Factors Combined with Trend Factors

Indemnity

Likely

Not Likely

1.1618 1.2115

1.0831 1.1178

1.3316

1.2139

1.6720

1.4254

2.7662

1.9453

Medical

Likely

Not Likely

1.0343

.9140

1.1087

.9634

1.2409

1.0336

1.4951

1.1220

2.0730

1.2631

The following benefit level factors convert incurred losses under the New York Law to the benefit level effective October 1, 2018:

PY 2012 2013 2014 2015 2016

Death 1.3472 1.3337 1.3209 1.2931 1.2714

NEW YORK BENEFIT LEVEL FACTORS

P.T. 1.3472 1.3337 1.3209 1.2931 1.2714

Major 1.0910 1.0895 1.0878 1.0829 1.0860

Minor 1.1955 1.1938 1.1920 1.1866 1.1900

Temporary 1.3472 1.3337 1.3209 1.2931 1.2714

Medical 1.1757 1.1757 1.1757 1.1757 1.1757

The following amendment factors convert incurred losses under the United States Longshore Act to the benefit level effective October 1, 2018:

PY 2012 2013 2014 2015 2016

Death 1.1778 1.1480 1.1218 1.0909 1.0598

FEDERAL BENEFIT LEVEL FACTORS

P.T. 1.1450 1.1160 1.0904 1.0603 1.0302

Major 1.1491 1.1187 1.0927 1.0615 1.0301

Minor 1.1494 1.1189 1.0928 1.0615 1.0301

Temporary 1.1450 1.1160 1.0904 1.0603 1.0302

Medical 1.1757 1.1757 1.1757 1.1757 1.1757

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B. ADJUSTMENT FOR CATASTROPHE AND HIGH COST CASES

In the classification experience, the loss amounts are limited to $500,000 per claim for both state and federal coverage. Expected excess factors bring the capped losses to the uncapped level.

The following shows the applicable excess factors by hazard group. An excess factor is defined as [1 / (1- excess ratio)]. The excess ratio is defined as the ratio of excess loss above $500K to the total unlimited loss.

A 1.239

B 1.266

C 1.288

D 1.350

E 1.397

F 1.543

G 1.654

In determining the final loss experience for each classification, limit reported losses to $500,000, and then developed to ultimate, trend and adjust to current benefit levels. Expected excess factors are then applied by Hazard Group. Generally, most of the excess portion of large losses is medical, however the excess factor is applied to the entire loss. Therefore, 40% of the indemnity excess losses for claims that are strictly workers' compensation are re-assigned to medical excess losses; If a claim is an Employers Liability (EL) only claim, then 100% of the medical excess losses are reassigned to indemnity excess losses; If a claim covers both WC and EL, then 40% of the medical excess losses are reassigned to indemnity excess losses. The resulting quantities, after the reassignment, are the final adjusted excess losses. The final ultimate losses equal the limited ultimate losses plus the final adjusted excess losses.

C. INDICATED PURE PREMIUM

The indicated pure premiums are the ratios of the final ultimate losses to the payrolls for policy years 2012 - 2016.

D. PURE PREMIUM UNDERLYING PRESENT RATE

The October 1, 2018 pure premiums were modified by the following factors to derive the PP underlying the present rate used for the current year. The factor is calculated as the ratio of the indicated PP from the current analysis to the indicated PP underlying the latest approved loss costs.

E. CREDIBILITY

Indemnity Medical

0.8959 0.8265

To derive the credibility for each classification, the full credibility standards (FCS) claim count for indemnity (850) and medical (400) are first multiplied by the state average cost per case to determine the FCS expected losses. The expected losses FCS for indemnity and medical are listed below:

$ 55,439,749 For Indemnity $ 17,501,164 For Medical

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Multiplying classification payrolls by the pure premiums underlying present rates, separately for indemnity and medical, determines expected losses for each classification. The ratio of expected losses to expected losses needed for full credibility raised to the power of 0.4 provides partial credibility by individual class in 1% intervals for indemnity and medical. Expected losses less than the minimum necessary for the 1% credibility level are assigned a credibility value of 0%.

F. DERIVED BY FORMULA

The proposed pure premiums result from the credibility described in item E, weighting the pure premiums indicated by the experience described in item C, with the pure premiums underlying the present rate described in item D.

Note that, for the maritime classes, the proposed pure premiums for "Program II ?State Act" were derived by multiplying the Formula Pure Premium for Program I by a relativity factor of 1.111, which reflects the experience differential for state benefits between Program I and Program II. Similarly, the proposed pure premiums for "Program II ? USL Act" were derived by multiplying the Formula Pure Premium for Program I by a factor of 1.975, which is derived by multiplying the relativity factor of 1.111 by 1.778, which represents the difference between benefits provided under the United States Longshore & Harbor Workers' Act and those provided by the New York Workers' Compensation Law.

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