Boca Raton, FL – As part of a review of excess loss factors used in NCCI’s class ratemaking and retrospective rating plans, NCCI reviewed severity trends by undeveloped size of loss.
In an excess loss factor review, NCCI develops losses to ultimate, and reflect loss development by size of loss. However, in this paper, NCCI looks at the trends in the data submitted prior to loss development.
This new research also:
- Looks at trends in average values of lost-time claims at third report exceeding several thresholds. We compare results of this analysis to analyses based on:
- Claims at fifth and seventh reports
- The medical and indemnity components of claims
- Provides an analysis on the assumption of a trend rate used to adjust claims to Policy Year (PY) 2008 dollars
- Gives a brief example showing that even when individual claims of varying size are subject to similar inflation, the growth in the amount of losses in excess of a given threshold will be substantially greater than the overall inflation
- Over the period from Policy Year 2001 to Policy Year 2008, for lost-time claims at third report, claims for all thresholds at least $50K showed similar growth rates
- From PY 2001 to PY 2005, claims exceeding the higher thresholds grew a little faster than total claims
- From PY 2005 to PY 2008, claims exceeding the higher thresholds grew a little more slowly than total claims
- Claims at later reports showed patterns similar to claims at third report
The complete report is available here: NCCI Severity Trends by Undeveloped Size of Loss (PDF)