annual report - new york compensation insurance rating board

Our 98th Year Of Service tO all inSurance carrierS that PrOvide WOrkerS cOmPenSatiOn inSurance

PrOtectiOn fOr all emPlOYeeS in neW YOrk State

© 2013 New York Compensation Insurance Rating Board

All rights reserved. No portion of this book may be reproduced by any means, or stored in a retrieval system for subsequentreproduction, without the written permission of the New York Compensation Insurance Rating Board.

President’s Message

As of this writing,many businesses and

families are still in the

process of attempting

to recover from the effect

of Hurricane Sandy.

The enormity of

the destruction and

devastation to the East

Coast of this country was

something that raised the awareness and sensitivity to these

issues in hopefully each and every one of us. While the Rating

Board itself, because of its midtown location, did not suffer

any damages or power outages, some of its members in the

downtown area and several employees’ homes did

unfortunately succumb to the wrath of the storm. The Board,

of course, was glad to extend a hand offering others temporary

meeting space, in our conference facility if possible, and

conducting food and other charity drives to assist the

unfortunate in their moment of need.

From a business perspective, the storm raised the level

of awareness of both business owners and others in a similar

capacity to be prepared for any future such incapacitating

occurrences. In this regard, the Board’s Disaster Recovery

Program is once again in the process of receiving further review

by our staff in the hopes of fleshing it out to identify any

potential business disruptions that have not been adequately

addressed.

In the past year, we have observed indications that

workers compensation cost levels continued to rise, which

prompted the recommendation by the Board of Governors for

a filing of an average 11.5% loss cost level increase. The

disapproval of this filing by the Department of Financial

Services may have possibly prompted carriers to reevaluate their

state workers compensation programs and/or seek other

underwriting solutions to achieve a desired position within

the workers compensation marketplace. It also resulted in a

combined effort by the membership and staff to explore further

data sources to help explain the need for proposed loss cost level

changes.

On a more positive note, the law which set into

place the loss cost system was extended until 2018,

underlying the importance of that model in evaluating rate

adequacy and facilitating a more competitive workers

compensation market within the state.

Advancements within the Rating Board also have

continued to take place with the completion of the second

stage of the Board’s Digital Library which has now been

shown interest by other Workers Compensation Data

Collection Organizations (DCO’s). Education has also

received high grades this past year with further commitment

to staff developed training programs and the assistance to

the state of New Jersey as a partner in the Board’s

Spectrum Operating System which is presently shared by

five DCO’s.

In achieving our goals, and always seeking to

improve, it is apparent that the guidance and assistance of

the Board’s members, those on Committees and otherwise,

is a key factor in the Board’s success and I wish to thank

all of you again for your assistance and support.

I look forward to your partnership again in 2013

which I am sure will bring with it many exciting and

interesting times for the New York workers compensation

industry.

Sincerely,

Monte Almer

execUtiVe staFF

From LeFt to right

WiLLiam tayLor, Vice-President UnderWriting & FieLd serVices

george a. Vega, Vice-President Finance & adminstration

LUcy decaro, Vice President oPerations

monte aLmer, President

mitcheLL tenzer, chieF inFormation oFFicer

ziV KimmeL, Vice President & chieF actUary

misson statement

To be the primary resource and authority for workerscompensation insurance in the state of New York by providingprofessional services and technical expertise through the use ofstate of the art technology in the development of high qualityproducts and information that meet the needs of the insuranceindustry, as well as employers, government agencies and allothers involved with the workers compensation system.

“Today, we are announcing that agencies are releasing their finalregulatory reform plans, including hundreds of initiatives that will reducecost, simplify the system, and eliminate redundancies and inconsistency. “

Cass suNsTeiN

Professor of Law, Harvard university. Former administrator, Office of information &Regulatory affairs

regULatory FiLings

Loss cost FiLing

on may 15, 2012, the rating Board, with theapproval of the Board of governors, submitted itsannual loss cost filing to the new york statedepartment of Financial services for approval. thisfiling was comprised of an experience indication of+6.0%, a trend factor of +4.0%, a +0.5% impact due tolegislative and regulatory changes and a +0.9%change in loss adjustment expenses. the filing alsoincluded no change in the charges for terrorism andnatural disasters and catastrophic industrialaccidents. the total indicated loss cost level changerequested in the 2012 filing was an average increasein loss costs of 11.5%. the initial filing documentwas subsequently supplemented by submissions ofrevised experience rating factors, an update to thepercentage charge for UsL&hW exposure fornon-F classes and indicated loss cost changes forvolunteer firefighters and ambulance workers.additional actuarial data was also submitted tothe department in response to a request forsupplementary information. this data includedaccident year experience and a detailed analysis ofpaid loss development patterns, as well as indicatedloss cost level indications that were calculated on thebasis of the accident year and the paid lossinformation.

the new york Workers’ compensation Lawrequires the superintendent of Financial services tohold a public hearing if a rate service organizationsubmits a loss cost filing for workers compensationthat is an increase of seven percent or more over theapproved loss costs from the prior year. since therating Board’s filing was greater than the statutorythreshold, the superintendent scheduled a publichearing on June 25, 2012 to consider the proposed losscost filing. at the hearing, the rating Board providedexpert testimony in support of the requested increase,and other interested parties also testified regardingspecific elements of the filing.

the department issued its opinion anddecision on July 16, disapproving the filing.although the actuarial analysis and the resultingoverall loss cost indication in the filing reflectedrecent changes in the system, in its decision thedepartment indicated that increasing loss costs atthis time would further harm struggling businesses,given the recessionary environment, and chose,therefore, to adopt a wait-and-see approach when itcomes to changing the loss cost level.

given the disapproval of the filing, the losscosts and related rating values remained unchangedand are still at the october 1, 2011 level. the newyork state assessment, which is not part of the losscosts, decreased by 1.2%, from 20.2% to 18.8% ofstandard premium.

~6~

neW yorK rating PLans & statisticaL PLan

a filing to amend the new york retrospectiverating Plan manual to incorporate revised excess losspure premium factors, state hazard group relativitiesand retrospective rating development factors wasapproved effective october 1, 2012. this annual changewill ensure that these factors are kept current withrespect to future inflationary effects on claim costs inthe establishment of retrospective premiums.

an additional filing to revise the excess loss purepremium factors was approved with an effective dateof January 1, 2013. this filing was made to ensureconsistency between the excess Loss Factor Formulashown in the retrospective rating Plan manual and thederivation of the excess loss pure premium factors.

a filing that revises the new yorkstatistical Plan for policies effective on and afterJanuary 1, 2013 was approved by the new yorkdepartment of Financial services. the Plan hasbeen reformatted and redesigned in the newedition to be more user friendly and explicit thanthe prior manual in its statement of plan rules, andis in a format that is consistent with the statisticalPlans used in most other jurisdictions. the newPlan has also been incorporated in the ratingBoard’s digital Library.

~7~

neW yorK WorKers comPensation & emPLoyers LiaBiLity manUaL

item description summaryr.c. Bulletin# and date

1revised hazard group

assignmentsadoption of revised hazard group

assignments. effective 10/1/122298

3/26/12

2Waiver of right to recover

from others

clarifications to the rules and algorithmsections of the manual regarding premium

calculation. effective 4/1/122291

3/1/12

3 Premium Verification Program criteria changes for carrier error thresholdand re-billable procedures. effective 4/1/12

22923/1/12

4auto dismantling -

code 3821clarification on the use of code 3821 for

incidental exposures. effective 4/1/122293

3/2/12

5 Venetian Blinds – code 2593Update to digest of rulings and interpretation

concerning code application. issued 4/1/12 2295

3/15/12

6department store retail –

code 8039 new payroll threshold for the use of

code 8039. effective 4/1/12 2296

3/15/12

7mobile crane and hoisting service

contractors – code 9534revised phraseology for code 9534 to include

concrete Pumpers. issued 4/1/122297

3/15/12

8non appropriated Funds

instrumentalities act coverageendorsement adoption.

effective 4/24/122305

6/7/12

2011 FiLings aPProVed in 2012

item description summaryrc Bulletin# and date

1hotel restaurant employees –

code 9058clarifying phraseology in footnote. issued 10/1/12 2310

8/22/12

2ambulance drivers –

code 7380 clarification on the assignment of ambulance drivers

employed by a hospital. issued 10/1/122311

8/22/12

3developmental organizations

- code 8864

Update digest entry and additional cross referencesfor developmental organizations, code 8864.

issued 10/1/122312

8/22/12

4 independent contractor rule clarification for independent contractors rule as itpertains to the construction industry. issued 10/1/12

23138/23/12

5administrative rules

and Procedures

Updated procedures regarding carrier timeframeto file ‘complaints’ (30 days instead of 10).

issued 10/1/122314

8/24/12

6rulings and interpretations –

notice of classificationschanged By the rating Board

new wording clarifying when/howclassification reviews begin.

issued 10/1/122315

8/24/12

2012 FiLings aPProVed

~8~

"i think some combined pressure could go a long way, could establish the factthat this legislation did pass and we mean business by it. We mean to have itenforced, we mean to have it become effective."

MajOR RObeRT OdeLL OWeNs

Former Congressmanu.s. House of Representatives

LegisLaTiON

although several bills, pertaining to workerscompensation and introduced in the 2011 session,were carried over into 2012, only two bills, bothintroduced in the 2012 session, were signedby the governor and enacted during the year.

extension of Loss cost rating methodology

extends the effectiveness of certainprovisions of law relating to workers compensationrate service organizations (loss cost rating; additionof public members to rating organization’sgoverning body) from June 2, 2013 until June 2, 2018.

effective July 18, 2012 (chapter 237, Laws of 2012)

internet system for tracking over-Prescribing

enacts the internet system for trackingover-Prescribing (i-stoP) act and creates aprescription monitoring program registry (part a);relates to prescription drug forms, electronicprescribing and language assistance (part B); relatesto schedules of controlled substances (part c);relates to continuing education for practitionersand pharmacists in prescription pain medicationawareness and the duties of the pain managementawareness workgroup (part d); relates to the safedisposal of controlled substances (part e).

effective august 27, 2012 (chapter 447, Laws of 2012)

although no federal legislation was enactedin 2012 that directly related to workers compensation,one piece of legislation referred to as thesmart act (or strengthening medicare andrepaying taxpayers act), which overhaulsthe medicare secondary Payer Program byaccelerating the processing of medicare conditionalpayments reimbursements in liability andworkers compensation settlements, by decreasingthe bureaucratic delays, has been passed byboth the United states house andsenate and awaits the President’s signature.

in addition to the above, the Board staffcontinues to track developments in the Federalinsurance office (Fio), terrorism risk insurance act(tria), which is due to expire in 2014, and theobama health care act as they relate to workerscompensation insurance coverage and costs.

neW yorK LegisLation FederaL LegisLation

~12~

neW yorK

WorKers comPensation

2012 reVieW

cLaim FreqUency and cLaim cost

Workers compensation financial data availablein 2012 showed that the continuing trend of decreasingclaim frequency may have come to an end, with anactual increase in the claim frequency level exhibitedfor 2010.

the observed new york lost-time (indemnity)claim frequency showed a consistent downward trendthrough 2005, followed by a flat trend through Policyyear 2007, with slight decreases observed in 2008through 2009. in policy year 2010, frequency hasincreased significantly for the first time in several years,and the resulting projection is for a flat or a slightdecreasing frequency trend going forward. studiessuggest that, during economic recessions, claimfrequency decreases due to changes in the mix ofemployees in the job market. generally, an improvingjob market lags behind economic recovery. therefore,since the economy has been slowly recovering, anincrease in the claim frequency due to economicconditions was evident in 2010 and may continue tooccur in the near term. other factors, such as theincrease in the maximum weekly benefits that wasimplemented as part of the 2007 legislation, may alsoput upward pressure on claim frequency going forward.the observed frequency trend in new york is, however,consistent with countrywide results.

source: nycirB Financial data* Projected

claim costs in new york were projected tocontinue to rise in 2012, for both indemnity andmedical.

Prescription drug costs continue torepresent a significant portion of overall medicalexpenses. Utilization of medical services and theincreasing use of new, and costly, technology inthe medical field continue to drive these costshigher for workers compensation. theimplementation of medical treatment guidelinesin december of 2010, and the subsequentmodifications of these guidelines may result insome savings in medical costs by reducing someof the utilization of medical services. however,most medical services that are rendered inaccordance with the guidelines do not requirepayer authorization, and that may offset some ofthe savings. expenses associated with theimplementation of the guidelines, as well ashandling requests for variance from theguidelines, and changes to the medical feeschedules, also effective in december 2010, mayalso offset some of the expected savings in overallmedical costs.

indemnity claim costs, after reflecting thequantifiable impacts of the 2007 reforms, areprojected to continue to rise, but at a slower pacethan the projected increase in medical costs.Preliminary reports on the effectiveness of themedical treatment guidelines indicate that theyare starting to work in many sectors, which shouldhelp to control indemnity costs by way of betteroutcomes for injured employees. guidelines forPermanent impairment and Loss of earningcapacity were implemented on January 1, 2012.as a result, the lag to Permanent Partial disabilityclassification may decrease, which might alsomitigate some of the increase in indemnity costsover time.

source: nycirB Financial data* Projected

~14~

indemnity Vs. medicaL

the relationship between indemnity andmedical costs has changed dramatically as a result of the2007 reforms. although the actual impact of thereforms is yet to fully manifest itself in the statisticaldata, indemnity costs are estimated to now representapproximately 55% of the total workers compensationclaim costs in new york. Prior to the reforms,indemnity costs represented well over 60% of overallsystem costs.

source: nycirB Financial data

UnderWriting resULts

on a calendar year basis, carriers on averagecontinued to experience an overall underwriting lossfor new york workers compensation business, in spiteof a significant improvement in the combined ratio in2011 compared to 2010. recent increases in the loss costlevel, as recommended by the rating Board, as well asthe economic recovery, contributed to an increasedpremium level in 2011, which resulted in a lower lossratio. expense ratios also decreased in 2011 as a resultof the increased premium volume, which helps toexplain the improved underwriting results.

source: ny statutory Page 14 data and insurance expense exhibit

PremiUm VoLUme

as expected, with the implementation of thereform and the associated reduction in rates in 2007,as well as an additional decrease in the loss costlevel in october of 2008, direct earned premiums in2008 experienced a significant decrease comparedto the prior years, which saw a decade of steadilyincreasing premium volume. despite loss cost levelincreases in 2009 and 2010, the economic downturnresulted in an additional premium decrease of over3% in 2009 and virtually no change in 2010. in 2011,however, the premium volume increased by over15%. this was as a result of higher approvedloss costs in recent years, as well as the effects of theeconomic recovery.

source: ny statutory Page 14 data

marKet share

the state insurance Fund has historicallybeen the largest writer of workers compensation innew york. although its share of the carrier markethad been increasing slowly, but steadily, from 2000through 2005, the Fund’s market share decreased in2006 to a level of 41%. the market share remainedflat through 2008 and, in 2009, the Fund’s marketshare decreased by 2.9 percentage points to 38% ofthe total new york market. additional slightdecreases in market share for the Fund are observedin both 2010 and 2011.

source: nycirB Financial data

~15~

historicaL rate / Loss cost changes

From 1996 through 2008, there was a cumulativereduction in manual rate level of over 40%. thesedecreases were attributable mostly to various reformsenacted in 1996 and the 2007 reform legislation. otherreasons for the large decrease over this time period wereimproving experience and regulatory decisions withrespect to the rating Board’s annual rate filings. in 2009,2010 and 2011, the increase in claim cost trends, as wellas the continued increase in the maximum weeklybenefits, resulted in three consecutive increases in theloss cost level. With claim frequency no longerexhibiting significant decreases and claim costcontinuing to rise, an 11.5% increase was filed with thedepartment of Financial services (dFs). this filing wasdisapproved by dFs and, therefore, loss cost levels didnot change in 2012.

source: nycirB

Loss cost mULtiPLiers

With the advent of loss costs in october2008, individual carrier rate levels, in the form ofloss cost multipliers, have, in effect, replaceddeviations in the private carrier market.indicators of carrier pricing can be observed fromthe most recent approved loss cost multipliers,updated as of december 2012. although theaverage private carrier multiplier has remainedfairly consistent over the past two years, and iscurrently 1.27, the dispersion of multipliersaround this average indicates that there issubstantial price competition at the current losscost level.

source: the ny state department of Financal services insurance(december 2012)

sUmmary

Loss cost adequacy will continue to be akey element for maintaining a healthy workerscompensation market in new york. changingclaim frequency and severity trends, the 2007reforms, specifically the increased maximumweekly benefits, adherence to the medicaltreatment guidelines and the manner in whichthe guidelines for Permanent impairment andLoss of earning capacity are applied, as well asimprovements in the efficiency of the benefitdelivery system, will continue to impact systemcosts in the future. these changes, the continuingnature of competition under the loss cost system,and the economic recovery will all be criticalelements and contributors to the health of theoverall workers compensation market in futureyears.

~16~

BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MED-ICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*AC-TUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPE-CIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UN-DERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERBOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVA-TION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIAL-FUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRA-TION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINAT-ING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MED-ICAL&CLAIMSWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS* BOG*NOMINAT-ING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MED-ICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*AC-TUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPE-CIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UN-D E R W R I T I N G * S P E C I A L F U N D S C O N S E R V A T I O N * A C T U A R I A L * M E D I C A L & C L A I M SBOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MED-ICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*AC-TUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPE-CIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UN-DERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ABOG*NOMINATING*ADMINISTRATION*UN-DERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMIN-ISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUND-SCONSERVATION*ACTUARIAL*MEDICAL&CLAIMSCTUARIAL*MEDICAL&CLAIMS BOG*NOMINATING*AD-MINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUAR-IAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVA-TION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRITING*SPECIALFUNDSCONSERVATION*ACTUARIAL*MEDICAL&CLAIMS*BOG*NOMINATING*ADMINISTRATION*UNDERWRIT-

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COMMiTTees

Board oF goVernors

LaUrie s. BarKhorn - chair

hartFord accident &indemnity co.

marK m. BattisteLLi

ParamoUnt ins. co.

Warren hecK

greater ny mUtUaL ins. co.

nancy r. treiteL-moore

LiBerty mUtUaL ins. co.

dennis hayes

the state insUrance FUnd

arthUr WiLcox

n.y.s. aFL-cio

Frederic BUse

n.y.s. BUsiness coUnciL

marK hUmoWiecKi

n.y.s. WorKers’ comPensation Board

Janet siLVerman

n.y.s. dePartment oF

FinanciaL serVices

~18~

the Board of governors (Bog)reviewed and adopted the rating Board’sproposed budget for the estimated expensesfor 2013, as recommended by theadministration committee. the Bog thenauthorized the assessment for the expenses ofthe rating Board on the Board membership.the Bog also reviewed the proposed 2013Budget for the special Funds conservationcommittee (sFcc) and authorized theassessment of each carrier’s share on themembership.

in addition to the above, the Bogauthorized the submittal to the new york statedepartment of Financial services of a loss costfiling of +11.5% subsequently disapprovedon July 16, 2012 by the department. Further tothe disapproval, Board members reviewed themerits of a response to the department’s orderand decision and authorized the submissionof a response along with a request to meet withthe department to discuss the thought processbehind the decision and any future impact ofsuch a decision.

the Bog also discussed the possibilityof having more detailed data available tosupport proposed loss cost changes andsuggested that a subcommittee of actuarialcommittee members, Board staff andrepresentatives from the Workers’compensation Board (WcB) be formed toexamine this premise. also, the Bog revieweda report from the WcB regarding data sharingand deferred consideration of the reportrecommendations to the data sharingsubcommittee before further Bog review.

the Bog further discussed andreviewed the possible effects of variousguidelines issued by the WcB includingmedical treatment, impairment (Loss ofearning capacity) and carpal tunnel. themembers also reviewed, with the sFccattorney, the issue of uncollectedassessments from self-insured trusts andoffered direction regarding the solution to thisproblem.

in addition, the Bog reviewed theBoard’s investment Policy guidelines andcarrier fine programs and made suggestionsregarding the current makeup of each of theseitems.

the Bog, furthermore, reviewedemployee education and Wellness Programsand made suggestions regarding measuringthe extent of employee satisfaction with eachof these Programs.

~19~

UnderWriting committee

ace aMerican ins. co.

Stephen A. hAwkinS

aMerican HoMe assurance co.

irA Feuerlicht

Greater nY Mutual ins. co.

John MoylAn

Hartford accident & indeMnitY co.

Mike ApAnowitch

libertY Mutual ins. co.

ShAne crockett

ParaMount ins. co.

MArk M. BAttiStelli

tHe state insurance fund

Sherwin tAylor

tHe travelers indeMnitY co.

JeSSicA MAyer

utica Mutual ins. co.

roBert MAnFredo

ZuricH aMerican ins. co.

helenA SchweighArdt

dAvid dickSon,

new York state afl-cio

MArk huMowiecki,

new York state

workers’ coMPensation board

MeMbers

&

rePresentatives

Public MeMbers

the Underwriting committee met on two occasions in 2012.at the spring 2012 meeting, the committee considered therecommendation of the actuarial committee to submit a filing tothe department of Financial services (dFs) for a projected loss costincrease of 18.7% to be effective october 1, 2012. it was explainedthat the major components for the increase were as follows: 1) 10.1%for experience; 2) 1.2% for regulatory and Legislative benefitchanges; 3) 6% increase in the trend Factor, and 4) a slight increasein the provision for loss adjustment expenses. at this meeting,following deliberation, the committee authorized that a filing, forthis level of increase, proceed to the department of Financialservices, to be effective october 1, 2012.

at the spring 2012 meeting, the committee was also advisedthat the ny state assessment percentage factor, assuming an 18.7%increase in loss costs in 2012, would be 15.9%. it was mentioned thiswould be a decrease of 3.6% from the current assessment percentage.

during the spring 2012 meeting, the committee wasprovided with an update on the classification relativity reviewresults. the committee was reminded of the recent trend, with thisreview, to apply additional scrutiny on classification codecombinations especially where there were credibility concerns. inthe previous year, this resulted in eleven separations ofclassification codes which were previously combined for experience(actuarial) purposes. at this meeting, the one remainingcombination was agreed to be separated. With this present strategy,the staff was assigned the task of performing a Low credibilityanalysis, for further review by the Underwriting committee.

in the spring 2012 meeting, the committee was alsoprovided with the recommendation of the actuarial committee tosubmit a revised new york statistical Plan. the Underwritingcommittee was provided with a draft of the plan, which was thenapproved for filing with the dFs with a proposed effective date ofJanuary 1, 2013.

at the spring meeting, the committee was also updated onthe filing made on march 1, 2012 regarding a schedule ratingProgram, and were advised of the department’s objection lettersubmitted on april 3, 2012. at this meeting, the committee thenprovided guidance and instruction to the Board regarding aresponse to the department’s objections. a response was made tothe department which was then followed by a filing disapprovalbased on the grounds that schedule rating is not permissible innew york state (referencing insurance regulation 129). at the Fallmeeting, the committee was updated on the activities by the Boardin refuting the department claim. the committee was informed

~20~

of the Board’s meeting with the department wherebythis and other aspects of schedule rating werereviewed and discussed. the Board staff explainedthat there is an ongoing dialogue established with thedepartment for the purpose of refiling the program.

in the Fall 2012 meeting, the committee wasadvised on the findings and recommendations ofstaff’s Low credibility review. this review resultedin a recommendation by staff, and approval by thecommittee, for the elimination of fifteen (15)classifications codes.

at the Fall meeting, the committee reviewedthe construction Premium adjustment Program,(cPaP) namely the (1) hourly wage table and (2) thereference to territorial differentials in the manual. itwas noted that this table had not been updated sincethe inception of the program and that a table changewas needed to bring the values in line with otherstates offering cPaP credits. Based on an actuarialstudy, the committee voted to amend the table from astarting value at $15.50 to $31.00 per hour.

the committee, during the year, also approvedvarious changes to the new york Workerscompensation and employers Liability manual,including as follows: updated digest criteria forhospital employees as ambulance drivers, code 7380;updates to the digest entries for ‘institutions for theBlind, aged and handicapped Persons, code 8864;’additional footnote and phraseology information forhotel restaurant employees, code 9058; clarificationthat changes in classification can also be made byinternal rating Board review; change in the timeframerequirement (30 days instead of 10) for rewrittenpolicies to be received by the rating Board; clarifyinglanguage that the ‘Law on independent contractors’only pertains to the construction industry; changes inthe procedures and requirements for ‘Letters ofauthority’; clarifications on ‘Board approval codes’;additional phraseology changes for cleaner-debrisremoval-construction or erection, code 5610; andlastly, digest page clarification for ‘iron or steelerection noc,’ code 5057.

the committee was provided information,at both the spring and Fall 2012 meetings, onproposals to enhance and modify procedures forthe Board’s test audit program. Following thespring meeting, a change in the re-billablepremium threshold for determining an audit errorto $500 was approved by the committee. at theFall meeting, a review of the test audit carrierevaluation proposal, endorsed by the audit &Fraud committee, was completed. Based on theinformation provided by the audit and Fraudcommittee, the Underwriting committee adopteda revised test audit Program which will changethe error ratio and fining criteria for carriers. theprimary change is that there would be anannualized (cumulative) evaluation review for acarrier versus independent quarterly reviews as itis presently done.

~21~

actUariaL committee

ace aMerican ins. co.

John celidonio

cHartis ProPertY casualtY co.

MAry gAillArd

continental casualtY co.

JuliA StenBerg


thoMAS McderMott

libertY Mutual ins. co.

nAncy treitel-Moore

PMa ins. co.

Scott curlee


reuBen epStein


MeAgAn S. Mirkovich

utica Mutual ins. co.

diAne k. hAuSSerMAn

ZuricH aMerican ins. co.

Jill o’dell

kevin MAtthew ryAn

bickerstaff, wHatleY,

rYan & burkHalter

MeMbers

&

rePresentatives

Public MeMber

there were two regularly scheduled meetings and oneteleconference meeting of the actuarial committee held in 2012.

the committee reviewed in detail the methodology and dataused in the calculation of the annual indicated loss cost change andrecommended that a general loss cost revision, based on theexperience of private carriers and the state insurance Fund, as wellas experience from large deductible policies, be filed effectiveoctober 1, 2012. included in this recommendation was a continuingaffirmation of the previous pricing methodology for incorporatingthe effects of the 2007 reforms in the filing, as well as the prospectiveincrease in costs associated with the annual statutory changes in themaximum weekly benefit. the potential effects of the 2007 reformswith respect to loss development, trend and loss adjustment expensewere specifically reviewed and analyzed as part of the committee’sconsideration of the 2012 loss cost level.

at the teleconference meeting, the committee reviewed thelatest information relating to retrospective rating Plan values, andrecommended that revised excess loss pure premium factors, togetherwith revised state hazard group relativities and revised retrospectiverating pure premium development factors, be filed to becomeeffective on october 1, 2012 to coincide with the annual loss costrevision. subsequently, the committee also recommended anadditional revision to the excess loss pure premium factors, to becomeeffective January 1, 2013. this revision was to ensure consistencybetween the excess loss factor formula in the retrospective ratingmanual, and the manner in which the excess loss pure premiumfactors are calculated. the committee recommended that additionalresearch be undertaken with respect to alternate methodologies forthe determination of future new york excess loss pure premiumfactors.

in the area of experience rating, the committee reviewed astaff analysis that supported an increase in the split point used in therating formula to differentiate between primary and excess losses.the committee reaffirmed its approval to file an increase in the splitpoint from the current $5,000 to $10,000 effective october 1, 2013. thecommittee also agreed that additional increases in the split point maybe necessary to a level consistent with the countrywide standard of$15,000, or possibly higher, subject to additional research.

~22~

the committee also reviewed a staff analysisof construction class Premium adjustment Programexperience and recommended that the parametersused to determine premium credits under thisprogram, which were not updated since the program’sinception in the 1990’s, be revised to reflectinflationary changes as well as make the credits givenunder the Program actuarially justified, based on theexperience of the policies participating in theProgram.

the committee reviewed the 2012 workperformed by the staff with respect to the medicaldata call and was informed that staff was workingwith other dcos to ensure proper usage of this data.

continued research of the new classratemaking methodology was reviewed by thecommittee, which provided guidance andrecommendations for further study of themethodology.

in conjunction with the rating Board’srewriting of the new york statistical Plan, thecommittee’s statistical Plan subcommitteecompleted its review of the revisedstatistical Plan. the committee subsequentlyapproved the revised Plan and authorized itsfiling with the department of Financial services,to become applicable for policies effective onand after January 1, 2013.

~23~

medicaL & cLaims committee

continental casualtY co.

lAwrence lAtour


glen pitruzzello

libertY Mutual insurance co.

JoSeph gAzzillo


MArilyn cArrettA


MArci FreidA

utica Mutual insurance co.

richArd creedon

MArk huMowiecki

new York state

workers’ coMPensation board

ex-officio MeMber

MeMbers

&

rePresentatives

the medical and claims committee was established as astanding committee in compliance with the 2008 statute relatingto the governance of data collection organizations.

this committee has the responsibility to assist the ratingBoard in the study of the administration of claims under theWorkers’ compensation Law, the medical, surgical and hospitalcare of injured workers and the costs associated with such claimsand medical care.

one teleconference meeting was held in 2012 duringwhich many topics associated with the 2007 reforms werediscussed, including the medical treatment guidelines, theguidelines for Permanent impairment and Loss of earningcapacity, the impact of the aggregate trust Fund on thesettlement of permanent partial disability cases and the overalladministration of claims since the implementation of the reforms.the committee acknowledged that the medical treatmentguidelines are working for post-reform claims, but expressedcontinued concern regarding the large number of variancerequests still being received. of particular concern was the issueof multiple variance requests on a single claim, which theWorkers’ compensation Board committee representativeindicated will be addressed in a future enhancement of theguidelines. With respect to the Loss of earning capacityguidelines, the committee indicated that additional educationwas needed for system participants, such as medical providersand judges. also discussed by the committee members was theeffect that the guidelines had on classification activity as well as,the impact on claim settlements relative to the requirements forpermanent partial disability cases to be paid into the aggregatetrust Fund.

the committee also discussed the impact of medicareset-aside rules and regulations in terms of both theadministration of these cases by the center for medicare andmedicaid services and the resultant impact on costs and the claimsettlement process.

in addition, the committee discussed the potential impactof the i-stoP legislation, and was in agreement that this wouldbe a potential cost saver, although the magnitude of savings isuncertain at this time.

~24~

nycirB 2012 annUaL meeting & LUncheon

Actuarial*Pricing*Research*Statisics & Statistical Reporting*Information Technology*Operations*Data Quality*Spec-trum Management*Rating Services*Experience & Merit Rating*Retrospective Rating*Compulsory Workplace Safety &Loss Consultation Program*Underwriting & Field Services*Policy Analysi*Classification Analysis*FieldServices*Audit*Premium Adjustment Program*Finance & Administration*Office Services Division*Human ResourcesDivision*MembershipActuarial*Pricing*Research*Statisics & Statistical Reporting*Information Technology*Opera-tions*Data Quality*Spectrum Management*Rating Services*Experience & Merit Rating*Retrospective Rating*Compul-sory Workplace Safety & Loss Consultation Program*Underwriting & Field Services*Policy Analysi*ClassificationAnalysis*Field Services*Audit*Premium Adjustment Program*Finance & Administration*Office ServicesDivision*Human Resources Division*MembershipActuarial*Pricing*Research*Statisics & Statistical Reporting*Infor-mation Technology*Operations*Data Quality*Spectrum Management*Rating Services*Experience & Merit Rating*Ret-rospective Rating*Compulsory Workplace Safety & Loss Consultation Program*Underwriting & Field Services*PolicyAnalysi*Classification Analysis*Field Services*Audit*Premium Adjustment Program*Finance & Administration*OfficeServices Division*Human Resources Division*MembershipActuarial*Pricing*Research*Statisics & StatisticalReporting*Information Technology*Operations*Data Quality*Spectrum Management*Rating Services*Experience &Merit Rating*Retrospective Rating*Compulsory Workplace Safety & Loss Consultation Program*Underwriting & FieldServices*Policy Analysi*Classification Analysis*Field Services*Audit*Premium Adjustment Program*Finance & Ad-ministration*Office Services Division*Human Resources Division*MembershipActuarial*Pricing*Research*Statisics &Statistical Reporting*Information Technology*Operations*Data Quality*Spectrum Management*Rating Services*Expe-rience & Merit Rating*Retrospective Rating*Compulsory Workplace Safety & Loss Consultation Program*Underwriting& Field Services*Policy Analysi*Classification Analysis*Field Services*Audit*Premium Adjustment Program*Finance& Administration*Office Services Division*Human Resources Division*MembershipActuarial*Pricing*Research*Sta-tisics & Statistical Reporting*Information Technology*Operations*Data Quality*Spectrum Management*Rating Serv-ices*Experience & Merit Rating*Retrospective Rating*Compulsory Workplace Safety & Loss ConsultationProgram*Underwriting & Field Services*Policy Analysi*Classification Analysis*Field Services*Audit*Premium Adjust-ment Program*Finance & Administration*Office Services Division*Human ResourcesDivision*MembershipActuarial*Pricing*Research*Statisics & Statistical Reporting*Information Technology*Opera-tions*Data Quality*Spectrum Management*Rating Services*Experience & Merit Rating*Retrospective Rating*Compul-sory Workplace Safety & Loss Consultation Program*Underwriting & Field Services*Policy Analysi*ClassificationAnalysis*Field Services*Audit*Premium Adjustment Program*Finance & Administration*Office ServicesDivision*Human Resources Division*MembershipActuarial*Pricing*Research*Statisics & Statistical Reporting*Infor-mation Technology*Operations*Data Quality*Spectrum Management*Rating Services*Experience & Merit Rating*Ret-rospective Rating*Compulsory Workplace Safety & Loss Consultation Program*Underwriting & Field Services*PolicyAnalysi*Classification Analysis*Field Services*Audit*Premium Adjustment Program*Finance & Administration*OfficeServices Division*Human Resources Division*MeAcActuarial*Pricing*Research*Statisics & Statistical Reporting*Infor-mation Technology*Operations*Data Quality*Spectrum Management*Rating Services*Experience & Merit Rating*Ret-rospective Rating*Compulsory Workplace Safety & Loss Consultation Program*Underwriting & Field Services*PolicyAnalysi*Classification Analysis*Field Services*Audit*Premium Adjustment Program*Finance & Administration*OfficeServices Division*Human Resources Division*Membershiptuarial*Pricing*Research*Statisics & Statistical Reporting*In-formation Technology*Operations*Data Quality*Spectrum Management*Rating Services*Experience & MeritRating*Retrospective Rating*Compulsory Workplace Safety & Loss Consultation Program*Underwriting & Field Serv-ices*Policy Analysi*Classification Analysis*Field Services*Audit*Premium Adjustment Program*Finance & Adminis-tration*Office Services Division*Human Resources Division*MembershipmbershipActuarial*Pricing*Research*Statisics& Statistical Reporting*Information Technology*Operations*Data Quality*Spectrum Management*Rating Services*Ex-perience & Merit Rating*Retrospective Rating*Compulsory Workplace Safety & Loss Consultation Program*Under-writing & Field Services*Policy Analysi*Classification Analysis*Field Services*Audit*Premium AdjustmentProgrActuarial*Pricing*Research*Statisics & Statistical Reporting*Information Technology*Operations*DataQuality*Spectrum Management*Rating Services*Experience & Merit Rating*Retrospective Rating*Compulsory Work-place Safety & Loss Consultation Program*Underwriting & Field Services*Policy Analysi*Classification Analysis*FieldServices*Audit*Premium Adjustment Program*Finance & Administration*Office Services Division*Human ResourcesDivision*Membershipam*Finance & Administration*Office Services Division*Human Resources Division*Member-shipActuarial*Pricing*Research*Statisics & Statistical Reporting*Information Technology*Operations*DataQuality*Spectrum Management*Rating Services*Experience & Merit Rating*Retrospective Rating*Compulsory Work-place Safety & Loss Consultation Program*Underwriting & Field Services*Policy Analysi*Classification Analysis*FieldServices*Audit*Premium Adjustment Program*Finance & Administration*Office Services Division*Human ResourcesDivision*MembershipActuarial*Pricing*Research*Statisics & Statistical Reporting*Information Technology*Operations

dePaRTMeNTs

actUariaL

the staff of the actuarial department focuseson pricing, legislative analyses, research, data qualityand special studies.

Pricing

the actuarial department continues to play avital role in various areas relating to both proceduraland technical issues within the new york workerscompensation system.

three filings were prepared in 2012, includingthe general loss cost revision and several associatedfiling supplements. the rating Board’s actuarial staffalso prepared supporting exhibits and provided experttestimony at a public hearing called by thesuperintendent of Financial services. this testimonydiscussed key elements of the loss cost filing, includingthe manner in which the impact of the 2007 reformlegislation was factored into the proposed loss costchange.

at the request of the actuarial committee, astudy of experience under the constructionclassification Premium adjustment Program wascompleted by the staff. this analysis comparedexperience of those insureds who have participated inthis premium credit program with all otherinsureds in the construction industry. as a result of thisanalysis, changes have been made to update theparameters used in the premium credit formula to moreclosely reflect inflationary effects and the creditsindicated by the underlying experience.

in 2012, department staff also revisited themethodology used to determine excess Loss PurePremium Factors. While additional research in this areais necessary, the department developed a methodologythat uses empirical data and dispersion of lossdevelopment factors. this methodology was reviewedand approved by the actuarial committee and wassubsequently approved by the department of Financialservices.

research

actuarial research of not only the currentmethodologies, but of prospective techniques andmethodologies, are critical to the success of both therating Board and the actuarial department. theactuarial department continues to study and perform

research in several important ratemaking areas.

in recognition of the need for more detailedmedical data to analyze new york medical costdrivers than is currently being reported, the ratingBoard contracted with the national council oncompensation insurance (ncci) in 2008 to collectdetailed new york medical transactional data. in2012, the rating Board received the second dataupdate of this call. the rating Board’s updateddataset now includes information on medicalservices performed over an 18 month period.Preliminary reports were subsequently generatedfrom this data and were shared with the actuarialcommittee and medical and claims committee.as additional data is received and analyzed, thisdata source will be a key tool in identifying theunderlying cost drivers of medical losses and theirimpact on the workers compensation system.

the overall balance of the experiencerating Plan is essential for the equity of theworkers compensation pricing system. Furthertesting of the Plan, through a series of quintiletests, was undertaken in 2012 as a key measure ofthe Plan’s equity and balance. staff has alsocontinued to monitor the activities of the ncci inthis area. as a result, study commenced withrespect to potential changes to the Plan in the areasof the split point, eligibility and the experiencerating formula. the work performed in 2012reconfirmed a decision by the actuarial committeeto revise the split point beginning in 2013. staffwill continue to examine the Plan to decidewhether further refinements are needed.

continued work was done in 2012 toexplore a possible change in classificationratemaking methodology to be consistent with thatbeing introduced in other states by the ncci anda number of independent rating organizations.the staff will continue these efforts in 2013.

~29~

statistics & statisticaL rePorting

the actuarial department is responsible foridentifying, checking and verifying unit statisticalreport losses, premium and payroll that do not fallwithin reasonable ranges of values. in 2012, effortscontinued within the department to identify and correcterroneous unit statistical reports (Usr’s) that could notbe resolved through customary data processing edits.as part of this process, the staff utilized additionalanalytical tools and reconciliation processes to improvethe overall quality of the Usr’s. Upon completion ofthe 2012 review process, schedule z data (unadjustedpayroll, premium and losses by classification) for Policyyears 2005 through 2009 was compiled by the actuarialdepartment and released by the rating Board. as anadjunct to the schedule z, pure premium classificationexperience (five years of developed payroll and lossesby classification) was also produced and posted on therating Board’s website, www.nycirb.org.

other relevant statistical information was postedon the rating Board’s website in 2012, including thelatest aggregate financial data call experience, claim costand claim frequency data by injury type, calendar yearunderwriting results and the details of the 2012 loss costfiling.

the actuarial staff has also continued to beactively involved with the Workers’ compensationBoard (WcB) and completed a project to cross-walkclaim information between the rating Board’s databaseand that of the WcB. the project examined the abilityto share the data between organizations, which willenable more accurate and detailed analyses of the newyork workers compensation system in the future.

in 2012, a new statistical Plan was completed bystaff and filed with and approved by the department ofFinancial services. the new Plan modernizes language,eliminates outdated hardcopy reporting processes andclarifies many of the more complicated reportinginstructions. the new Plan is effective for policieswritten on and after January 1, 2013.

the actuarial department is alsoresponsible for collecting and analyzing theannual aggregate Financial data submitted by thecarriers. to accomplish this task, the staffadministers the new york Financial callinformation system© (nyFcis©), which is a webbased vehicle for the submission of the annualaggregate data. in 2012, several enhancementswere incorporated into the system that weredesigned to improve carrier interface. additionaldata edits were also introduced to assure dataaccuracy. the new york data call incentiveProgram is also part of the nyFcis©, and carriersthat fail to submit the aggregate data on time orsubmit incorrect data are subject to fines under theprogram. Both the system edits and the incentiveprogram work to ensure quality for the financialdata.

~30~

inFormation technoLogy

the information technology (i.t.)department is comprised of the Programming andinfrastructure management divisions.

the infrastructure management team isresponsible for the Board’s Local area network(Lan), its associated servers and equipment, anddesktop configuration and support. in addition tothe normal day-to-day responsibilities to keep theinfrastructure running and supporting users anddata security, this team further reduced, fromimprovements accomplished in 2011, the timerequired for the nightly data back-up processing.other achievements during 2011 were the upgradingof the staff’s workstations to increase productivityand the increase of data storage arrays for the e-mailand electronic file systems.

two major accomplishments by theprogramming team were the implementation of thenew interactive new york manuals - digital Libraryedition, and the schedule z Part of Body (PoB)processing and classification experience report.

the digital Library is an enhanceddatabase driven version of the Workers'compensation manuals, statistical Plans, andreference guides. the conversion from textpublications to database driven web applicationsis intended to benefit members, and other users,with faster, easier and more accurate informationregarding new york's Workers compensationrules, procedures and protocols.

the new PoB processing andclassification experience report will assist theactuarial department in facilitating the researchof an alternative approach to derive classificationloss costs.

in addition, the programming stafftransitioned several report processes from locallyrun applications to a server based solution,unifying the entire process from processing theschedule z to producing source data for thereporting of traditional classification experience.

~31~

oPerations

the operations department handles much ofthe Board’s routine processing of data and containsthree support divisions, data quality, spectrummanagement and rating services. some of the staff’sachievements and efforts are also related to the ratingBoard’s involvement with other data collectionorganizations (dcos) and industry organizations.our participation in compensation data exchange(cdx), the american cooperative council oncompensation technology (accct) and theelectronic data interchange (edi) committee of theWorkers compensation insurance organization(Wcio) allows the Board to continue to provide usefultools and services to the industry that make use ofnational data standards. Participation in thesecollaborative exchanges demonstrates the ratingBoard’s commitment to reducing the costs associatedwith data collection.

data qUaLity

the data quality division has theresponsibility to collect, verify and process Unitstatistical data in accordance with the new yorkstatistical Plan. during 2012, this division received5,626 electronic files containing 647,032 individualunit statistical reports. of these, 53,878 exposure andclaims records were found to contain questionable orerroneous information, slightly down from 2011.

in november 2011, the rating Boardannounced the release of our manage Usr (mUsr)on-line application. mUsr allows our membercarriers to create, view and correct unit statisticalreports; prepare Wcstat files for submission directlyto the Board, or via cdx; view error reports; andmanage the timely submission of data through a reporttracking feature. since its release, 70 carrier groups,representing 95% of the market, have signed on for thisservice.

this division also administers the ratingBoard’s Unit statistical Late charge Program and in2012 issued 1,327 delinquent Lists and 785 Fine Lists.

sPectrUm management

spectrum is the Board’s internalprocessing system through which the majority ofthe Board’s data is processed. the spectrummanagement team performs quality assuranceand is responsible for ensuring that spectrumoperates effectively and accurately, testing andapproving all enhancements and changes.

spectrum is nearing the end of a 2 ½ yearproject to convert the system utilizing newertechnology, making it more efficient anduser-friendly. the final phase of this conversionto our Policy processing system is scheduled to gointo production in april 2013.

two phases of the conversion project werecompleted during 2012 and includedenhancements to our authorized classificationsystem, cPaP, Unit statistical tracking andcorrespondence processing.

~32~

retrosPectiVe rating

retrospective election notices, as well aspolicies and endorsements related to retrospectiverating, are reviewed in this area. this divisionreceived and processed 20,197 documentsincluding 595 submissions under new york’sLarge risk rating option.

comPULsory WorKPLace saFety &Loss consULtation Program

the rating Board’s statutoryresponsibilities under the compulsory Workplacesafety and Loss consultation Program is toidentify and notify those employers who meet theProgram’s criteria. notifications were issued to886 employers in 2012, a 14% decrease from 2011.

rating serVices

the rating services division administers thenew york experience rating Plan, including meritrating, and the new york retrospective rating Plan.

exPerience & merit rating

during 2012, the Board issued 101,719experience ratings, 20,369 revised experience ratingsand 207,042 merit ratings. rating information isposted on the Board’s website and available to thecarrier of record, although requests for informationon hardcopy are still received. after receiving theappropriate authorization, the staff responded to 15,953requests for ratings and other supporting documents.

nUmBer oF ratings

~33~

underWriting & field ServiceS

a primary objective of the rating Board is theoversight and validation of Wc Policy constructionand insurance company compliance for the state ofnew york. this responsibility is handled by theUnderwriting services unit which is structured byteams and led by two managers and four teamLeaders. this team concept allows for dedicatedinsurance carrier assignments. the assignment of acarrier to a team ensures that policies, endorsements,cancellations and reinstatements, submitted to therating Board, are properly written. the teams alsorespond and answer underwriting questions, resolveemployer matters and maintain the classificationsystem. each team is made up of Policy analysts,class analysts and individuals with expertise in theownership rules of the experience rating Plan. theteam approach allows the rating Board to foster anenvironment for the employee’s professional growthby exposing them to all aspects of policy dataelements and processing.

nearing the end of 2011 and early 2012, theteams implemented a system enhancement whichautomated the delivery of work items, which in mostcases eliminated many manual paper intensive stepsand streamlined the overall work process. evidencehas shown that this enhancement has improvedproductivity and is aiding staff with accuracy anddepth of policy review which is always being strivedfor. there are ongoing system reengineering effortsunderway for 2013 which will have further additionalimpact on all of the teams and related work processes.these system changes are intended to greatly enhance,streamline, and improve the effectiveness of thepolicy validation process and improve overall dataquality.

Field services is primarily comprised of fieldstaff, supporting either audit or inspection functions.support staff is located in the home office providingcoordination support for the field staff. the field staffconducts onsite employer audits (auditor) andinspections (inspectors). although organizeddifferently than the underwriting teams, theseindividuals also respond directly to carriers aboutauditing and inspection related questions.

the department maintains accuratenessthrough the work of a project and quality assuranceteam. these individuals marshal and lead projectsinvolving procedures, system enhancements,

classification studies, documentation, and otherspecial project work. there were many projectsunderway in 2012, most notably implementationactivities for phases of the policy processingrewrite project, additional implementations ofWork queue (noted above) and the continuationof various classification projects. the incrementalimplementation of various system edit changescontinued in 2012, with more analysis on policyedits planned for 2013. Progress was made on anongoing project regarding a review and updatingof departmental procedures, resulting in manynew ideas for reengineering of internal processesand system related changes. in 2013, this team willcontinue with the change management aspect offinal phases of the policy system changes as notedabove.

another responsibility of the Underwritingdepartment is to review policy and endorsementfilings submitted by carriers. in 2012, there was aslight decrease in overall carrier filing activity.the rating Board received a total of 29 carrierletter inquiries and 176 individual carrierendorsements for review. one hundred andsixty-five endorsements for review were approved,while four were rejected and seven weresubmitted but were not under the rating Board’sjurisdiction. these numbers indicate an overalldecreasing trend in recent years, despite the oneyear reversal in this trend last year. it is believedthat carrier filing activity is very much dependentupon regulatory trends or requirements in a givenyear. the declining trend is also attributed to theauto-adopt provision for carrier endorsements,implemented in 2010, which greatly reduced therequired number of endorsement submissions.

~34~

UnderWriting serVices

PoLicy anaLysis

all workers compensation policies,experience or non-experience rated, are reviewed by therating Board. Policy analysis involves the in-depthreview and validation of policies and their subsequenttransactions. Policy analysis is primarily a systemgenerated process, however, some of the methods aremanual and performed to ensure that all policies areproperly written. a carrier is required to correct anypolicy writing errors detected by this review. thecorrection process is enforced through the ratingBoard's criticism Fining Program.

the type of transactions submitted by a carrierinclude: policies, endorsements, cancellations andreinstatements. all carrier information is submittedelectronically and recorded in the rating Board's datacollection systems. once the data is recorded, the Policyanalyst is able to review various data elements, such asnames, locations, and endorsements on the policies.the analyst will scrutinize this information based onprescribed edits and data reporting requirements.

in 2009, the rating Board eliminated thesupport for paper (hard copy) policy submissions.the number of transactions, since that time, hasdropped significantly to only a few in 2012. anyremaining hard copy exception transactions are insupport of complex risks such as Wrap-Up, andthree-year Policies. the following chart reflects thepaper hard copy transaction submissions frommember carriers, received by the rating Board, over thepast four years:

through the policy edit review process, thefollowing policy information is evaluated: theapplication of the correct experience modification;classification(s); the proper use of loss cost factors;the proper use and application of endorsement(s);and any other elements affecting the premiumcalculation. Underwriting services has a teamapproach to processing and considers turnaroundtime in resolving issues a top priority. a Policyanalyst has the knowledge and resources to findanswers from other team members, such as aclassification analyst on a classification concern,or to transfer an issue within the team to determineresolution and response versus the continuousquerying of the carrier for more information.

in 2012, the Board processed approximately1.57 million policy, endorsement, and cancellation/reinstatement electronic transactions. in 2011, justover 1.56 million transactions were processed. thisrepresents a 0.6% increase in overall transactionactivity from the prior year. the statisticalbreakdown on electronic transactions, for each year,is as follows:

2012

yearnumber of ‘hard copy’

transactions

2012 62

2011 19

2010 2,903

2009 30,707

type of electronic

transaction

excludingnysiF

nysiFonly

total electronic

transactions

Policies 386,624 182,029 568,653

endorsements 399,703 94,950 494,653

canc. / reins. 358,130 149,870 508,000

totaLs 1,144,457 426,849 1,571,306

~35~

2011

the rating Board also receives transactionsthat are immediately rejected by the system and,therefore, not reflected in the values noted above.more specifically, there were 39,162 rejectedtransactions in 2012 compared with 44,811 in 2011.When combined with the previously shown totals for2012, the rating Board received over 1.6 million policytransactions. also, for 2012, the error ratio was 2.4%of the overall transactions received. this is a markedimprovement over the rejection error ratio of recentyears which was 2.8% for 2011 and 3.7% in 2010.

Policies and endorsements that pass all systemedits error free eliminate the need for any form ofstaff review. in recent years the trend has shown asteady and noticeable improvement in the quality ofelectronically submitted transactions. the totalnumber of policies and endorsements requiringreview decreased to 82,186 in 2012 from 155,984transactions in 2011 or a decrease of 47.3%. Whencompared to recent years there are a few observationsregarding this marked percentage decrease. the firstis that it is reflective of a previously observed trendin most years, where there is a declining number oferrors identified by the system. the second is thatwith the Board’s implementation of the Work queuesystem it was determined that in past years certainerrors were being flagged twice and were reviewedand counted accordingly. these duplicate errors havebeen eliminated in the work distribution process andPolicy review is now more precise and accurate. thethird reason for the decrease in system errors needingreview is that carriers continue to improve on dataquality in the transmission of electronic transactions.

in 2012, there was a decrease in the numberof errors which led to criticism correspondenceand/or fines to the carrier. these are systemgenerated errors in need of review and are oftenattributed to policies not submitted with theproper mandatory endorsements and/or statisticalcodes.

in 2012, there were 13,136 transactionswhich resulted in formal criticisms being issued.the percentage decrease in the number ofcriticisms issued in 2012 versus 2011 is -41.7%.however, in 2012, the ratio of criticisms issued tothe total number of transactions reviewed was16.0%, which is slightly more than the ratio in 2011which was 14.4%.

yearPolicies and endorsements

requiring review

2012 82,186

2011 155,984

2010 119,459

2009 137,072

yearnumber of

criticisms issued

2012 13,136

2011 22,515

2010 16,917

2009 13,278

type of electronic

transaction

excludingnysiF

nysiFonly

total electronic

transactions

Policies 380,501 185,453 565,954

endorsements 420,315 92,465 512,780

canc. / reins. 331,360 149,752 481,112

totaLs 1,132,163 427,670 1,559,846

~36~

as a result of the trend of improved dataquality from carriers, Policy analysts to spend moretime on in-depth policy review and analysis. thisdeeper analysis is a result of additional staff trainingas well as the continuation of adjustments andactivation of additional policy level system edits.system edit changes are being made with thecontinued intention of improving data integrity andthe ability to further analyze the carrier informationreceived.

Policy analysis also includes investigatingemployer name and legal ownership changes, forboth experience and merit rated employers. thisreview facilitates the determination of theappropriateness of the inclusion or exclusion of legalentities in an employer’s rating. the interpretation ofthese ownership rules, as well as being able toprovide an explanation of the rules, is handled byownership analysts who are experienced with theadministration of the experience rating Plan.

the following reflects the past four years’results from review of ownership investigations:

over the past few years, there has been asteady increase in the number of ownershipinvestigations performed. this is the result ofadditional ownership analyst staffing which beganin 2009 and also by transitioning some of the initialsteps in the ownership process to the Policy analystposition. the ownership analyst team continues togain experience in their ownership processing roles.this maturing process is evidenced by a dramaticreduction in backlogs regarding multistate policyownership items. as reflected above, since 2009,

cases reviewed indicate an average annual increaseof 15%. since 2009, through 2012, the total numberof cases reviewed has increased approximately47.5%. From 2009 the number of Letters/affidavitsprocessed, in a given year, for an ownership issue,has nearly doubled.

cLassiFication anaLysis

classification analysis is the means bywhich the rating Board oversees the reliability ofthe classification assignment process, managed bythe carrier, for a given insured. typically, theclassification review process begins with an on-siteinspection of the employer’s operation and placeof business. Field inspectors submit their findingsby electronically transmitting their inspectionreports to the rating Board’s home office. thisreport provides the initial information necessaryfor the classification analysts in order to begin thereview process.

Following review of the inspection report,the classification analyst may choose to finalizethe classification or they may elect to suspend thereport for later review. Providing this flexibilityfor the classification analyst aids in workprioritization and has greatly improved theturnaround time for expedited inspections. in thepast, without this ability to suspend or diaryinformation, there was frequently a delay inwaiting for an inspector to submit their routineinspection report to the office.

oWnershiP inVestigations

2009 2010 2011 2012

casesreviewed/Processed

13,759 16,164 17,638 20,297

annual % difference

17.5% 17.5% 9.1% 15.1%

Letters and affidavits Processed

6,087 7,912 8,395 11,380

annual % difference

-0.3% 30.0% 6.1% 35.6%

~37~

routine inspections are those which are madeon a predetermined schedule for experience ratedemployers, while test inspections are made on arandom basis for non-experience rated employers. thefollowing charts illustrate the number of routine andtest inspections reviewed over the past four years:

in this and the following chart, thenumbers previously reported were based upon the‘number of risks’ versus the ‘number of locations’inspected. two years ago, an adjustment to the countswas introduced which now reflect the actual number oflocations inspected. For referencing and contrast, 2009is shown as originally reported and subsequent yearsare shown using the newer methodology. the columnswith an asterisk (*) reflect this newer approach.

in 2012, there was a continuation of the shifttowards a refocusing on routine inspectionassignments. this effort began in 2009 with theimplementation of an improvement in system logicsurrounding the selection process on routineinspection assignments. these assignments arepreferable for review as they represent the experiencerated risks. With the utilization of this new selectionmethodology, 2012 shows relative stabilization with2010 and 2011.

class analysts reviewed 11,220 routineinspections in 2012. of those reviewed, 1098 required achange in classification. of the 1,098 classificationchanges, 490 were changes to the governingclassification. indicated in the table above, neither theincrease in the number of routine assigned inspections,nor the percent requiring classification change wassignificant. these numbers appear fairly constant sinceadoption of the new methodology.

the chart below indicates for testinspections the new counting methodologypreviously described. Unlike the routineinspections, the number of test inspectionsreviewed continued to increase. the percentageincrease in 2012 was 29.1% which followed anincrease of over 85% in 2011. Under the testinspection Program, in 2012, a total of 321inspections resulted in a change in classification.of these classification changes, 228 required achange to the governing classification.

there is a third category of inspections,also performed by the rating Board, whichcontinues to experience a steady increase overrecent years. these inspections are known asexpedite inspections. these are manuallyprescribed inspections assigned from managementand the classification department directly. theyare often the result of classification inquiries,complaints or needed for classification studies. in2012, the rating Board conducted 982 expediteinspections, which resulted in 228 classificationchanges from these inspections. there were 124changes to the governing classification. thisreflects a considerable difference in the frequencyof governing class changes versus the changeswhich occur with other types of inspection.

test

insPections2009 2010* 2011* 2012*

(1) number reviewed

3,845 879 * 1,632 * 2,107 *

(2) number ofclass changes

573 119 139 321

(3) % requiringchanges (2) ÷ (1)

14.9% 13.5% 8.5% 15.2%

roUtine

insPections2009 2010* 2011* 2012*

(1) number reviewed 7,774 10,171 * 10,705 * 11,220 *

(2) number ofclass changes

783 878 898 1,098

(3) % requiringchanges (2) ÷ (1)

10.1% 8.6% 8.4% 9.8%

~38~

changes in governing classification for routine,test and expedite cases amounted to 718 in 2012 versus359 in 2011, and 388 in 2010. the reason for thesignificant increase in the number of requiredgoverning class changes for 2012 is not clear. it may beattributed to the current economic environment and,possibly, higher than expected policy movement fromcarrier to carrier. Further study of this phenomenon willbe undertaken in future years.

there is much correspondence which comes tothe classification Unit, such as inquiries initiated byinsureds, insurance carriers, brokers, state legislators,and, in some instances, the new york state departmentof Financial services. classification inquiries are a highpriority item for all class analysts and for the ratingBoard in general. the Underwriting department isfocused on providing prompt service to membercarriers, employers and their representatives on any typeof inquiry. in 2009, there were 8,061 classificationinquiries, in 2010 the number increased to 9,582,(+18.9%) and in 2011 the number continued to increaseto 10,326, an increase of 7.8% from 2010. in 2012, therewas a 13.4% reduction in the number of inquiriesreceived. it is hoped that increased education andfurther information on the Board’s website haveobviated the need for additional inquiries.

yearnUmBer oF resPonses to

corresPondence

2012 8,940

2011 10,326

2010 9,582

2009 8,061

the Underwriting department’s teamstructure allows for a more flexible carriercommunication and response process. althoughthe Policy teams deal with a variety of issues,whether they be policy processing, ownership orclassification in nature, the objective is todemonstrate a consistent and cohesive voice to amember carrier on identified errors or problems.in 2012, the department continued with systemimprovements to support carrier responses and, inparticular, expanded the use of email incommunicating errors. Future systems projectshave been identified which, in time, will offercarriers additional internet access and provide foralternative communication capabilities. in time,it is hoped that this will include providing policyinformation over the web, such as: transactionerrors, inspection reports and audit reports.Finally, a specific project to better managepolicies, which is underway at the rating Board,will allow for a two way on-line communicationapproach on carrier errors and resolutionhandling which will expedite these issues in amuch more effective and efficient manner.

FieLd serVices

there are two divisions in the Fieldservices Unit - audit and inspection. these twounits work within assigned territories throughoutnew york state.

the audit division has the primaryresponsibility of administering the new yorkcarrier test audit Performance Program, the newyork construction classification Premiumadjustment Program and the PremiumVerification Program. the Premium adjustmentProgram, where employers file applications inorder to receive premium credits and the PayrollLimitation Program apply to employers subject toeligible construction/contracting classifications.

the inspection division conducts on-sitephysical inspections of employers’ premises toensure that those employers are properlyclassified.

~39~

the support staff in the home office primarilycoordinates the various processes for the fieldrepresentatives. this includes field assignment andreport submission responsibilities. in addition to theirprimary functions, the office support staff also providesguidance and assistance regarding manual ruleinterpretations and aids in the resolution of disputesbetween insureds and their insurance carriers. theywill also assist with issues referred by the Workers’compensation Board, the new york state departmentof Financial services, carriers, brokers, accountants,attorneys or policyholders and their representatives.

the Field services department also worksclosely with Underwriting services in resolvingclassification disputes, as an inspection or special auditis often necessary to determine proper classificationcode(s) for an insured’s business, be it the classificationof the business or the individual classification of theemployees.

aUdit

selection of employers for physical audits,under the Premium Verification Program, is donepurely on a random basis by the rating Board. theBoard auditor conducts the audit by completing athorough review of all elements of an insured’s finalpremium billing. this review is necessary in order todetermine the accuracy of an insurance carrier’spremium charges to their insureds. the audit willexamine all premium calculation methodologies usedby carriers to determine an insured’s final premium.this examination consists of physical audits,policyholder statements, estimated or waived audits,telephone audits and electronic data interface audits.all industries, except for those that are purely clericalin nature, or under Federal Laws, are reviewed underthis program.

during the audit, Board auditors will alsoreview and validate the classification of the business,the numbers of employees and their duties (includingexecutive officers, sole proprietors, partners ormembers of LLc’s, if coverage is elected), all reportedpayrolls, advisories regarding alleged independentcontractors, the status of subcontractors, experiencemodifications, merit ratings and all other premiumcharges. the auditors, and the review staff, will also

examine whether the correct Loss cost and Losscost modifier has been used by insurance carriers.

a Board auditor will also be assignedaudits where there is an attempt by the Board toassist in resolving disputes between insureds andinsurance carriers. this may involve a specificreview of the payroll allocation of each employeeto the appropriate classification, a review of salesfigures to determine the proper classification of aninsured’s operations, or other specifics about thepremium calculation in order to resolve the dispute.

the following chart summarizes the resultsof the Board’s premium audit verifications for themost recent three-year period:

the rating Board completed essentially thesame number of audits in the current versus theprior year. this compares to an increase of 4.1% inaudits completed in 2011 (3,087) versus that in 2010(2,966). this slight decrease in 2012 illustrates astabilized and reasonable level of performancebased upon current field auditor staffing levels.

in recent years there had been a decliningtrend in the actual audit error ratio, although thedecline was very small. in 2012, however, a slightincrease in this ratio can be noted. specifically, in2012, the audit error increase over 2011 was 4.1%,while the increase in the prior year was only 0.8%.

the composition of audits types completedproduced the following error ratios:

Physical audits –------------ 27%Policyholder statements – 44%estimated audits------------ 76%telephone audits -----------35%edi audits --------------------56%

yearaudit

Performedaudit errors

identifiedaudit error

ratio

2012 3,064 1,138 37.1%

2011 3,087 1,093 35.4%

2010 2,966 1,060 35.7%

~40~

the primary reasons for carrier errors are:1) differences in remuneration and/or the allocation ofpayroll; 2) misclassification of the employer oremployee(s); and 3) other causes. the following chartillustrates these breakdowns for the most recentthree-year period.

the net premium difference between the ratingBoard’s premium and the carrier’s premium for the pastthree years is shown in the chart below. it is interestingto note that, although the audit error ratio is relativelyhigh, the overall premium difference between carrierand Board premium remains relatively small.

the appropriate carrier is notified of all resultsonce premium verifications are finalized. the carrierthen has thirty (30) days to review the rating Boardaudit results and either correct the policy premium billor notify the rating Board of its disagreement. shoulda carrier fail to notify the Board in either instance, a finecould result under the criticism Fining Program.in 2012, five (5) insurance carriers were placed underreview for subpar audit performance.

during 2012, the audit division also wasauthorized by the Board’s Underwriting committee toimplement two changes to the Premium VerificationProgram. the first was that the re-billable premiumthreshold on audits was changed from $400 to $500,plus or minus, and the minimum of $150 waseliminated in favor of a straight five percent of

premium for differences under $500.

the second was that carriers can no longercollect additional premiums based on premiumverifications (test audits) where the insured wasundercharged. this was done in order to bring newyork in line with other jurisdictions where thecollection of additional premium was notpermitted. carriers, however, are still required toreturn premium when an audit determines that aninsured was overcharged.

the audit division also distributes bothquarterly and annual Premium VerificationPerformance reports to carriers. this information isintended to assist member carriers in theirevaluation of the effectiveness of each method oftheir premium billing, such as physical audits,policyholder statements, estimates, waived audits,telephone audits, as well as audits electronicallysubmitted by the insured to the carrier. the dataprovided in these reports and the individualpremium verifications are used to assist carriers inidentifying any problems that may exist in acarrier’s underwriting, payroll audit or billingdepartments.

insPection

on-site physical inspections of employersare conducted by the inspection division. theseinspections are performed in order to verify andvalidate that the various types of businesses,throughout new york state, are properly classifiedfor assignment to each employer by the insurancecarrier. inspections are made on a predeterminedcycle for experience rated employers (routine) orrandomly under the test inspection Programfor non-experience rated employers (test).occasionally, a special request for an inspectionmay be required in order to resolve a classificationdispute between an insured and the carrier in theevent that the rating Board has yet to inspect aninsured’s operations.

type of audit difference

2010 2011 2012

(1) Payroll/remuneration 61.3% 58.5% 54.6%

(2) classification (risk & employee) 24.5% 26.6% 26.2%

(3) other causes 14.2% 14.9% 19.2%

audit results 2010 2011 2012

Board net Premium $26,242,509 $28,595,028 $29,973,930

carrier net Premium $26,052,581 $29,647,945 $29,621,655

% difference of Board Premium to carrier Premium

+0.7 -3.6 +1.2

~41~

completed inspections for the past three (3)years are shown below and include both scheduled(routine) and random (test) inspections:

the test inspection Program wasestablished to ensure that employers ineligible forexperience rating are properly classified. thenumber of test inspections varies from year to yearas illustrated by the fluctuations shown in the chartabove. these fluctuations result from the strategicdecisions made on how many routine orscheduled inspections are necessary. For example,in 2011 and 2012 less routine inspections wereperformed in order to concentrate on a greaternumber of smaller vs. larger employers.

rating Board inspectors will also conductrandom, unassigned inspections while in aparticular area of their territory. these arespontaneously performed when a long distance istraveled for the inspection of an assigned employerand there are no other assigned inspections in thesurrounding location. these are known as“inspector generated” worksheet (igW)inspections and may also occur when the ratingBoard is conducting an industry review. anindustry review takes place to evaluate a group ofemployers in order to determine whether or not thistype of employer or industry warrants changeregarding their classification.

PremiUm adJUstment Program

the Field services department alsoadministers the new york constructionclassification Premium adjustment Program(cPaP). this program provides premium credits toeligible employers in the construction/contractingindustry by recognizing the inherent wage leveldifferences within this industry. the total numberof new applications decreased from 6,423 in 2011 to5,701 in 2012. this represents an 11% decrease fromthe previous year.

in 2012, the rating Board issued credits underthe program resulting in an average credit of 15.4%.this compares to the average credit of 14.6% issued in2011 and 13.4% in 2010. there were 259 employerswho did not meet the cPaP eligibility requirementsand thus did not qualify for a credit. the primaryreason an employer is ineligible is a result of notmeeting the experience rating eligibility requirementor their average hourly wage was less than theminimum of $15.50 per hour.

the use of the Board’s “cPaP on-Line”application submittal service, implemented in 2010,could account for the lower number of newapplications. this is a result of insureds being ableto submit their applications on-line and the receiptand counting of multiple applications (as oftenhappened with paper applications) appears to havelessened.

inspections Performed 2010 2011 2012

total inspections 14,351 14,071 13,745

scheduled (routine) 13,775 12,222 11,884

random (test) 576 1,849 1,861

~42~

Finance & adminstration

oFFice serVices diVision

the office services division is responsible forthe imaging of policy related documents, endorsements,and cancellations into the Board’s on-line system(spectrum). in addition, it is responsible for archivingnumerous historical documents into the Board’ssharePoint site. this unit also processes anddistributes mail and transmits e-mail notifications tothe Board’s membership.

in 2011, the imaging section of this divisionprocessed and imaged 42,937 hard copy documents withan average of 5 pages per document. in 2012, a total of42,013 hard copy documents were imaged with anaverage of 5 pages per document.

the volume in the Board’s incoming mailremained at approximately the same level with 48,700items of correspondence in 2012 compared to 48,000 in2011. the outgoing mail decreased slightly from 58,936in 2011 to 57,301 in 2012.

hUman resoUrces diVision

the Board averaged 138 staff membersduring the year. Under the Board’s salaryclassification program, 119 performance reviewswere conducted and 15 employees received gradepromotions. ten (10) employees receivedcommendations for being employed by the Boardfor 10 years or more. approximately 70 % percentof the Board staff has accrued five or morecontinuous years of service.

during the year, one employee from theUnderwriting department and one employee fromthe operations department received their Workerscompensation Professional (WcP) designation.the education committee continues to encourageemployees to pursue designations to further theircareers in the insurance industry.

the Wellness committee organized anemployee health Fair, participated in the aids andBreast cancer Walk and hosted various donationdrives. Weekly yoga sessions were also continuedalong with monthly Pedometer challenges. thecommittee continued to host sessions on nutrition,physical well being and financial seminars.

the health & safety committeeimplemented a company-wide health and safetyPolicy and Program. three employees attended thegeneral industry safety and health training andbecame osha certified and 8 employees werecertified in First aid and cPr.

~43~

accoUnts oF the rating Board

the financial transactions are summarized as follows:

assessments Levied $16,247,799membership Fees + 279,813total assessments $16,527,6122012 expenses -15,702,708Unexpended appropriation $ 824,904

the unexpended appropriation, which partly reflects income derived from the Late chargePrograms, will be credited to members and subscribers upon adjustment of their accounts. theadjustment will be combined with the quarterly assessments made after the 2012 written premiumreports have been received by the rating Board.

expenses: 2012 2011 2010

salaries 8,602,332 8,331,097 7,924,199

contract services 276,615 213,425 132,514

Personnel cost 70,180 7,014 13,487

Pensions 891,911 1,025,364 1,211,545

F.i.c.a 584,117 562,077 540,094

employees’ group insurance 1,719,843 1,642,958 1,346,724

employees’ savings Plan 293,840 271,663 248,473

statutory W/c & d/B insurance 68,119 39,143 46,684

Unemployment insurance tax 38,588 39,591 40,638

rent for space 1,973,943 1,196,176 1,261,956

electricity 99,769 108,793 109,905

rent for machines 121,723 151,932 52,762

maintenance & repairs 177,131 188,508 1,150,878

Furniture & Fixtures 60,347 59,916 671,850

stationery & supplies 84,677 106,002 79,688

Printing 13,086 14,836 18,445

telephone 55,743 57,224 48,607

Postage 32,757 40,316 35,296

travel 259,094 271,694 237,924

insurance, general 41,704 55,622 34,222

Legal 349,617 150,940 280,219

rent tax 1,195 15,356 46,261

system Projects 1,044,748 924,183 1,054,601

miscellaneous 456,869 478,766 604,786

total expenses 17,317,948 15,952,596 17,191,761

Less special income 1,335,427 1,158,987 1,540,116

assessable expenses 15,982,521 14,793,609 15,651,645

Less annual membership Fee 279,813 274,188 263,935

net disbursements 15,702,708 14,519,421 15,387,710

assessment ratios 0.00300* 0.00400 0.00428

FinanciaL comParison oF exPenses

*2012 PremiUm estimated~44~

The membership of the Board at the end of 2011 and 2012 was as follows:

The following changes in membership have occurred since the last report:

2011 2012

STOCK CARRIERS 341 342

NON-STOCK CARRIERS 29 30

STATE INSURANCEFUND

1 1

RECIPROCAL CARRIER 1 1

TOTAL 372 374

ADMISSIONS EFFECTIVE

Markel Insurance Company 02/08/12

Pharmacists Mutual Insurance Company 03/07/12

Berkshire Hathaway Homestate Insurance Company 03/07/12

Employers Preferred Insurance Company 06/01/12

American Family Home Insurance Company 08/17/12

American Modern Home Insurance Company 08/17/12

Arch Indemnity Insurance Company 09/12/12

Farmers Insurance Exchange 09/27/12

Riverport Insurance Company 11/09/12

MEMIC Casualty Company 11/09/12

~46~

RESIGNATIONS EFFECTIVE

EMPIRE INSURANCE COMPANY 03/01/12

BANCINSURE, INC. 03/14/12

REDLAND INSURANCE COMPANY 05/10/12

CENTURY INDEMNITY COMPANY 05/14/12

CLARENDON NATIONAL INSURANCE COMPANY 06/18/12

FAIRFIELD INSURANCE COMPANY 06/19/12

PRINCETON INSURANCE COMPANY 09/19/12

GATEWAY INSURANCE COMPANY 12/12/12

NAMES CHANGES EFFECTIVE

REPUBLIC WESTERN INSURANCE COMPANY TOREPWEST INSURANCE COMPANY

01/18/12

AMERICAN HARDWARE MUTUAL INSURANCE COMPANY TOMOTORISTS COMMERCIAL MUTUAL INSURANCE COMPANY

01/27/12

EMPLOYERS REINSURANCE CORPORATION TOWESTPORT INSURANCE CORPORATION

02/08/12

ACE INDEMNITY INSURANCE COMPANY TOWESTCHESTER FIRE INSURANCE COMPANY

03/12/12

TM CASUALTY INSURANCE COMPANY TOTOKIO MARINE AMERICA INSURANCE COMPANY

05/17/12

~47~

~A~

ACADIA INSURANCE COMPANYACCIDENT FUND GENERAL INSURANCE CO.ACCIDENT FUND INSURANCE CO. OF AMERICAACCIDENT FUND NATIONAL INSURANCE CO..ACE AMERICAN INSURANCE COMPANYACE FIRE UNDERWRITERS INSURANCE CO.ACE PROPERTY & CASUALTY INSURANCE CO.ACIG INSURANCE COMPANYADMIRAL INDEMNITY COMPANYADVANTAGE WORKERS COMPENSATION INS. CO.AIOI INSURANCE COMPANY OF AMERICAAIU INSURANCE COMPANYALL AMERICA INSURANCE COMPANYALLIANCE NATIONAL INSURANCE COMPANYALLIANZ GLOBAL RISKS US INS. CO.ALLIANZ UNDERWRITERS INSURANCE CO.ALLIED EASTERN INDEMNITY COMPANYALLMERICA FINANCIAL BENEFIT INS. CO.AMERICAN ALTERNATIVE INSURANCE CO.AMERICAN AUTOMOBILE INSURANCE CO.AMERICAN CASUALTY CO. OF READING PAAMERICAN CENTRAL INSURANCE CO.AMERICAN COUNTRY INSURANCE CO.AMERICAN ECONOMY INSURANCE CO.AMERICAN FAMILY HOME INSURANCE CO.AMERICAN FIRE & CASUALTY CO.AMERICAN FUJI FIRE & MARINE INS. CO.AMERICAN GUARANTEE & LIABILITY INS.AMERICAN HOME ASSURANCE COMPANYAMERICAN INSURANCE COMPANYAMERICAN MODERN HOME INS. CO.AMERICAN PET INSURANCE COMPANYAMERICAN SAFETY CASUALTY INS. CO.AMERICAN STATES INSURANCE CO.AMERICAN ZURICH INSURANCE CO.AMERISURE INSURANCE COMPANYAMERISURE MUTUAL INSURANCE COMPANYAMGUARD INSURANCE COMPANYARCH INSURANCE COMPANYARCH INDEMNITY INSURANCE COMPANYARGONAUT INSURANCE COMPANYARGONAUT MIDWEST INSURANCE COMPANYASSOCIATED INDEMNITY CORPORATIONASSURANCE COMPANY OF AMERICAATHENA ASSURANCE COMPANYATLANTIC SPECIALITY INSURANCE COMPANYAUTOMOBILE INSURANCE CO. OF HARTFORDAUTOONE INSURANCE COMPANYAUTOONE SELECT INSURANCE CO.AXA INSURANCE COMPANY

MEMBERS AS OF DECEMBER 31, 2012

~B~

BANKERS STANDARD INS. CO.BERKLEY NATIONAL INS. CO.BERKLEY REGIONAL INS. CO.BERKSHIRE HATHAWAY HOMESTATE INS. COBITUMINOUS CASUALTY CORPORATIONBITUMINOUS FIRE & MARINE INS. CO.BLUE RIDGE INDEMNITY CO.BLUE RIDGE INSURANCE CO.BROTHERHOOD MUTUAL INS. CO.

~C~

CALIFORNIA INSURANCE CO.CAMDEN FIRE INSURANCE ASSOCIATIONCAPITOL INDEMNITY CORPORATIONCAROLINA CASUALTY CO. INCORPORATEDCASTLEPOINT INSURANCE COMPANYCASTLEPOINT NATIONAL INS. COMPANYCENTRAL MUTUAL INSURANCE COMPANYCENTRE INSURANCE COMPANYCHARTER OAKS FIRE INSURANCE CO.CHARTIS PROPERTY CASUALTY CO.CHEROKEE INSURANCE COMPANYCHUBB INDEMNITY INSURANCE CO.CHURCH MUTUAL INSURANCE CO.CIM INSURANCE CORPORATIONCINCINNATI CASUALTY CO., THECINCINNATI INDEMNITY CO., THECINCINNATI INSURANCE CO., THECITIZENS INSURANCE CO OF AMERICACLERMONT INSURANCE CO.COLONIAL AMERICAN CASUALTY & SURETY

CO. COMMERCE & INDUSTRY INS. CO.CONTINENTAL CASUALTY CO.CONTINENTAL INDEMNITY CO.CONTINENTAL INSURANCE CO., THECONTINENTAL WESTERN INS. CO.CRUM & FORSTER INDEMNITY CO.

~D~

DAIMLER CHRYSLER INS. CO.DIAMOND STATE INS. CO.DISCOVER PROPERTY & CASUALTY INS CO.

~I~


~E~

EASTERN ADVANTAGE ASSURANCE COMPANYEASTERN ALLIANCE INSURANCE COMPANYEASTGUARD INSURANCE COMPANYELECTRIC INSURANCE COMPANYEMPLOYERS FIRE INSURANCE COMPANYEMPLOYERS COMPENSATION INS. CO.EMPLOYERS INSURANCE COMPANY OF WAUSAUEMPLOYERS MUTUAL CASUALTY COMPANYEMPLOYERS PREFERRED INSURANCE COMPANYERIE INSURANCE COMPANYERIE INSURANCE COMPANY OF NEW YORKERIE INSURANCE PROPERTY CASUALTY CO.EVEREST NATIONAL INSURANCE COMPANYEXCELSIOR INSURANCE COMPANYEXECUTIVE RISK INDEMNITY INCORPORATED

~F~

FAIRMONT INSURANCE COMPANYFARM FAMILY CASUALTY INS. CO.FARMERS INSURANCE EXCHANGEFARMINGTON CASUALTY COMPANYFDM PREFERRED INSURANCE COMPANY, INC.FEDERAL INSURANCE COMPANYFEDERATED MUTUAL INSURANCE COMPANYFEDERATED RURAL ELECTRIC INS. EXCHANGEFEDERATED SERVICE INSURANCE COMPANYFIDELITY & DEPOSIT COMPANY OF MD.FIDELITY & GUARANTY INSURANCE COMPANYFIDELITY & GUARANTY INS. UNDERWRITERS INC, FIRE DISTRICTS INSURANCE COMPANY, INC.FIRE DISTRICTS OF NY MUTUAL INS. CO.FIREMAN'S FUND INSURANCE COMPANYFIREMEN'S INS. CO. OF WASH. D.C.FIRST LIBERTY INSURANCE CORP.FIRST NATIONAL INS. CO. OF AMERICAFLAGSHIP CITY INSURANCE COMPANYFLORISTS' INSURANCE COMPANYFLORISTS' MUTUAL INSURANCE COMPANYFOREMOST INS. CO. OF GRAND RAPIDS

MICHIGANFOREMOST PROPERTY & CASUALTY INS. CO.FOREMOST SIGNATURE INSURANCE COMPANY

~G~

GENERAL CASUALTY CO. OF WISCONSINGENERAL INS. CO. OF AMERICAGENERAL STAR NATIONAL INS. CO.GENESIS INSURANCE COMPANYGLOBAL LIBERTY INS. CO. OF NEW YORKGRANITE STATE INSURANCE COMPANYGRAPHIC ARTS MUTUAL INS. COMPANYGREAT AMERICAN ALLIANCE INS. CO.GREAT AMERICAN ASSURANCE CO.GREAT AMERICAN INSURANCE CO.GREAT AMERICAN INS. CO. OF NYGREAT DIVIDE INSURANCE COMPANYGREAT NORTHERN INS. CO.GREAT WEST CASUALTY COMPANYGREATER N. Y. MUTUAL INS. CO.GREENWICH INSURANCE COMPANYGUARANTEE INS. CO.GUIDEONE MUTUAL INS. CO.

~H~

HANOVER INSURANCE COMPANYHARCO NATIONAL INSURANCE COMPANYHARLEYSVILLE INSURANCE COMPANYHARLEYSVILLE INS. CO. OF NEW YORKHARLEYSVILLE PREFERRED INS. CO.HARLEYSVILLE WORCESTER INS. CO.HARTFORD ACCIDENT & INDEMNITY CO.HARTFORD CASUALTY INS. CO.HARTFORD FIRE INS. CO.HARTFORD INS. CO. OF THE MIDWESTHARTFORD UNDERWRITERS INS. CO.HDI-GERLING AMERICA INS. CO.HEREFORD INSURANCE COMPANYHERMITAGE INSURANCE COMPANYHIGHLANDS INSURANCE COMPANYHOMELAND INS. CO. OF NEW YORK

~I~

ILLINOIS NATIONAL INS. CO.IMPERIUM INSURANCE COMPANYINDEMNITY INS. CO. OF NORTH AMERICAINDIANA LUMBERMENS MUTUAL INS. CO.INFINITY ASSURANCE INS. CO.INSURANCE COMPANY OF GREATER N. Y.INSURANCE COMPANY OF NORTH AMERICAINS. CO. OF THE STATE OF PENN.INSURANCE COMPANY OF THE WESTINTERSTATE INDEMNITY COMPANY

~II~


~L~

LANCER INSURANCE COMPANYLEADING INSURANCE GROUP INS. CO., LTD.LIBERTY INSURANCE CORPORATIONLIBERTY INSURANCE UNDERWRITERS INC.LIBERTY MUTUAL FIRE INSURANCE COMPANYLIBERTY MUTUAL INSURANCE COMPANYLM GENERAL INSURANCE COMPANYLM INSURANCE CORPORATIONLM PERSONAL INSURANCE COMPANYLM PROPERTY AND CASUALTY INS. COMPANYLUMBERMEN'S UNDERWRITING ALLIANCE

~M~

MAIN STREET AMERICA ASSURANCE COMPANYMAINE EMPLOYERS' MUTUAL INS. CO.MAJESTIC INSURANCE COMPANYMANUFACTURERS ALLIANCE INS. COMPANYMARKEL INSURANCE COMPANYMARYLAND CASUALTY COMPANYMASSACHUSETTS BAY INSURANCE COMPANYMEMIC CASUALTY COMPANYMEMIC INDEMNITY COMPANYMERCER INSURANCE COMPANYMERIDIAN SECURITY INSURANCE COMPANYMERCHANTS INS. CO. OF NEW HAMPSHIREMERCHANTS MUTUAL INSURANCE COMPANY MERCHANTS PREFERRED INSURANCE COMPANY MICHIGAN MILLERS INSURANCE COMPANYMID CENTURY INSURANCE COMPANYMIDDLESEX INSURANCE COMPANYMIDWEST EMPLOYERS CASUALTY COMPANYMITSUI MARINE & FIRE INSURANCE COMPANYMITSUI SUMITOMO INS. CO. OF AMERICAMOTORIST COMMERICAL MUTUAL INS. CO. MOUNT VERNON FIRE INS. COMPANYMOUNTAIN VALLEY INDEMNITY COMPANY

~N~

NATIONAL AMERICAN INSURANCE CO.NATIONAL CASUALTY COMPANYNATIONAL FIRE INS. CO. OF HARTFORDNATIONAL GRANGE MUTUAL INS. CO.NATIONAL INTERSTATE INS. CO.NATIONAL LIABILITY & FIRE INS. CO.NATIONAL SURETY CORPORATIONNATIONAL UNION FIRE INS. CO. OF PITTS., PANATIONWIDE AGRIBUSINESS INS. CO.NATIONWIDE MUTUAL FIRE INS. CO.NATIONWIDE MUTUAL INS. CO.NATIONWIDE PROPERTY & CASUALTY

INSURANCE. COMPANYNETHERLANDS INSURANCE COMPANYNEW HAMPSHIRE INSURANCE COMPANYNEW JERSEY MANUFACTURERS INS. CO.NEW YORK MARINE & GENERAL INS. CO.NIPPONKOA INSURANCE COMPANY, LTDNORGUARD INSURANCE COMPANYNORTH AMERICAN ELITE INS. CO.NORTH AMERICAN SPECIALTY INS. CO.NORTH POINTE INSURANCE COMPANYNORTH RIVER INSURANCE COMPANYNORTHBROOK INDEMNITY COMPANYNORTHERN ASSURANCE CO. OF AMERICANORTHERN INSURANCE COMPANY OF NYNORTHWESTERN NATIONAL CASUALTY CO.NORTHWESTERN NATIONAL INS. CO.NOVA CASUALTY COMPANY

~O~

OAK RIVER INSURANCE COMPANY (KANSAS)OHIO CASUALTY INSURANCE COMPANYOHIO SECURITY INSURANCE COMPANYOLD REPUBLIC GENERAL INS. CORPORATIONOLD REPUBLIC INSURANCE COMPANYONEBEACON AMERICA INSURANCE COMPANYONEBEACON INSURANCE COMPANYONEBEACON MIDWEST INSURANCE CO.ORISKA INSURANCE COMPANY

~III~


~P~

PACIFIC EMPLOYERS INSURANCE COMPANYPACIFIC INDEMNITY COMPANYPARAMOUNT INSURANCE COMPANYPATRIOT GENERAL INSURANCE COMPANYPEERLESS INDEMNITY INSURANCE COMPANYPEERLESS INSURANCE COMPANYPENN LUMBERMAN'S MUTUAL INS. CO.PENN MILLERS INSURANCE COMPANYPENN. MANUFACTURERS ASSN. INS. CO.PENN-AMERICA INSURANCE COMPANYPENNSYLVANIA GENERAL INSURANCE COMPANYPENNSYLVANIA MANUFACTURERS INDEMNITY CO. PENNSYLVANIA NATIONAL MUTUAL CASUALTY CO. PETROLEUM CASUALTY COMPANYPHARMACISTS MUTUAL INSURANCE COMPANYPHOENIX INSURANCE COMPANYPLATTE RIVER INSURANCE COMPANYPRAETORIAN INSURANCE COMPANYPREFERRED MUTUAL INSURANCE COMPANYPREFERRED PROFESSIONAL INSURANCE CO.PRESERVER INSURANCE COMPANYPROCENTURY INSURANCE COMPANYPROFESSIONAL LIABILITY INS. CO. OF AMERICAPROPERTY & CASUALTY INS. CO. OF HARTFORDPROTECTIVE INSURANCE COMPANYPROVIDENCE WASHINGTON INS. CO.PUBLIC SERVICE MUTUAL INSURANCE COMPANY

~Q~

QBE INSURANCE CORPORATION

~R~

RANGER INSURANCE COMPANYREGENT INSURANCE COMPANYREPUBLIC-FRANKLIN INSURANCE COMPANYREPWEST INSURANCE COMPANYRIVERPORT INSURANCE COMPANYRLI INSURANCE COMPANYROCHDALE INSURANCE COMPANYROCKWOOD CASUALTY INSURANCE COMPANY

~S~

SAFECO INS. CO. OF AMERICASAFETY FIRST INSURANCE COMPANYSAFETY NATIONAL CASUALTY CORP.SAMSUNG FIRE & MARINE INS. CO. LTD.SEABRIGHT INSURANCE COMPANYSECURITY NATIONAL INS. CO.SELECTIVE INS. CO. OF AMERICASELECTIVE INS. CO. OF NEW YORKSELECTIVE INS. CO. OF SOUTH CAROLINASELECTIVE WAY INS. CO.SENECA INS. CO. INCORPORATEDSENTINEL INSURANCE COMPANYSENTRY CASUALTY COMPANYSENTRY INSURANCE A MUTUAL COMPANYSENTRY SELECT INSURANCE COMPANYSOMPO JAPAN FIRE & MARINE INS. CO.

OF AMERICASOMPO JAPAN INS. CO. OF AMERICASPARTA INSURANCE COMPANYST. PAUL FIRE & MARINE INS. CO.ST. PAUL GUARDIAN INSURANCE COMPANYST. PAUL MERCURY INSURANCE COMPANYST. PAUL PROTECTIVE INS. CO.STANDARD FIRE INSURANCE COMPANYSTARR INDEMNITY & LIABILITY COMPANYSTAR INSURANCE COMPANYSTARNET INSURANCE COMPANYSTATE AUTO PROPERTY & CASUALTY

INSURANCE COMPANYSTATE AUTOMOBILE MUTUAL INS. CO.STATE FARM FIRE & CASUALTY COMPANYSTATE FARM GENERAL INSURANCE CO.STATE INSURANCE FUND, THESTATE NATIONAL INSURANCE CO. INC.STRATHMORE INSURANCE COMPANYSUN INSURANCE OFFICE OF AMERICA INC

~IV~

~T~

T.H.E. INSURANCE COMPANYTECHNOLOGY INSURANCE COMPANYTIG INSURANCE COMPANYTNUS INSURANCE COMPANYTOKIO MARINE AMERICA INSURANCE COMPANYTOKIO MARINE & NICHIDO FIRE INS. CO., LTDTOWER INSURANCE COMPANY OF NEW YORKTOWER NATIONAL INSURANCE COMPANYTOYOTA MOTOR INSURANCE COMPANYTRANS PACIFIC INSURANCE COMPANYTRANSGUARD INSURANCE CO OF AMERICA INCTRANSPORTATION INSURANCE COMPANYTRAVELERS CASUALTY & SURETY CO OF

AMERICATRAVELERS CASUALTY & SURETY COMPANYTRAVELERS CASUALTY CO. OF CONNECTICUTTRAVELERS CASUALTY INS. CO. OF AMERICATRAVELERS COMMERCIAL INS. CO.TRAVELERS INDEMNITY COMPANYTRAVELERS INDEMNITY COMPANY OF AMERICATRAVELERS INDEMNITY CO. OF CONNECTICUTTRAVELERS PROPERTY CASUALTY CO.

OF AMERICA*TRUCK INSURANCE EXCHANGETRUMBULL INSURANCE COMPANYTWIN CITY FIRE INSURANCE COMPANY

~U~

U. S. FIDELITY & GUARANTY INS. CO.U. S. FIRE INSURANCE COMPANYU.S. SPECIALITY INSURANCE COMPANYULICO CASUALTY COMPANYUNIGARD INDEMNITY COMPANYUNIGARD INSURANCE COMPANYUNIGARD SECURITY INSURANCE COMPANYUNION INSURANCE COMPANYUNITED FARM FAMILY INSURANCE COMPANYUNITED NATIONAL CASUALTY INS. CO.UNITED NATIONAL SPECIALTY INS. CO.UNITED STATE LIABILITY INSURANCE COMPANYUNITED WISCONSIN INSURANCE COMPANYUNIVERSAL UNDERWRITERS INS. CO.UTICA MUTUAL INSURANCE COMPANYUTICA NATIONAL ASSURANCE COMPANYUTICA NATIONAL INS. CO. OF OHIOUTICA NATIONAL INSURANCE CO. OF TEXAS

~V~

VALLEY FORGE INSURANCE COMPANYVANLINER INSURANCE COMPANYVIGILANT INSURANCE COMPANYVIRGINIA SURETY COMPANY, INC.

~W~

WAUSAU BUSINESS INSURANCE COMPANYWAUSAU GENERAL INSURANCE COMPANYWAUSAU UNDERWRITERS INS. CO.WESCO INSURANCE COMPANYWEST AMERICAN INSURANCE COMPANYWESTCHESTER FIRE INSURANCE COMPANYWESTERN SELECT INSURANCE COMPANYWESTFIELD INSURANCE COMPANYWESTPORT INSURANCE CORPORATIONWILLIAMSBURG NATIONAL INSURANCE COWORK FIRST CASUALTY COMPANY

~X~

XL INSURANCE AMERICA, INC.XL SPECIALITY INSURANCE COMPANY

~Z~

ZENITH INSURANCE COMPANYZURICH AMERICAN INSURANCE COMPANYZURICH AMERICAN INS. CO. OF ILLINOIS

* RECIPROCAL


~V~

annual report - new york compensation insurance rating board

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