basics of financial call data reporting requirements1—calendar year call for workers compensation...

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1© Copyright 2015 National Council on Compensation Insurance, Inc. All Rights Reserved.

Basics of Financial Call Data Reporting RequirementsPresented by: Ferne Friedberg and Brian Barnett


Objective

Provide a basic understanding of Financial Call data, including the reporting

requirements, recommended workflow, and Aggregate Data Quality Incentive

Program (ADQIP).

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Agenda

• Collection and Use of Financial Call Data• Resources and Tools• Premium Categories• General Reporting Requirements• Financial Data Calls• Financial Call Components• Calls 8, 31, and 10• Recommended Workflow• Aggregate Data Quality Incentive

Program (ADQIP)


Collection and Use

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What Is Financial Data?

Aggregated (Summarized)

Calendar-Accident

Year

Calendar Year

Policy Year


What Does NCCI Collect?

PrimaryRatemaking

Calls

SupplementalRatemaking

Calls

Premium-Based Billing and

Residual Market Calls

State-SpecificCalls

Compliance Forms

• 22 Aggregate Financial Calls

• Categorized and Grouped

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How Is Financial Data Used?

• At the state level—NCCI uses this data for ratemaking purposes

• Also supports:

• Overall market analysis and research

• Response to state regulatory requirements


Resources and Tools

5


Data Reporting Tab


Financial Call Season Web Article

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How Is Financial Data Reported?

Financial Data Collection tool:• 21 of the 22 Calls are reported electronically• 1 hard copy Call

ncci.com

Create

SubmitValidate

ImportCopy

Notifications


How Is Financial Data Reported?

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Guidebook Reference

Financial Call Reporting Guidebook Reference


Financial Call Reporting Guidebook

The Financial Call Reporting Guidebook is your primary reference for instructions on completing your Financial Calls accurately.

ncci.com

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Financial Call Reporting Guidebook

Part 1 –Guidebook Overview


Financial Call Reporting GuidebookPart4

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Part9

Financial Call Reporting GuidebookPart9


Resources and Tools

To support Financial Call reporting:

• Financial Call Reporting Guidebook• Edit Matrix

• Data Quality Web page• Financial Call season Web article—with links to

related circulars• Financial Data Collection tool• Financial data validator—as assigned • Webinars on Demand• Data Educational Program materials

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Premium Categories


Premium Categories

Loss Costs

Rates

Combined

Relativities

Part5

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Category—Loss Costs

Loss cost states (also called competitive pricing states):

• Publish loss costs (also known as pure premiums) to cover indemnity (lost wages) and medical benefits

• Generally, loss costs do not cover expenses; carriers file a loss cost multiplier (LCM)

Part5


Part5

Loss Cost States31 loss cost states:

Alabama Alaska Arkansas Colorado Connecticut

District of Columbia Georgia Hawaii Kansas Kentucky

Louisiana Maine Maryland Mississippi Missouri

Montana Nebraska Nevada New Hampshire

New Mexico

North Carolina Oklahoma Oregon Rhode

IslandSouth

Carolina

South Dakota Tennessee Utah Vermont Virginia

West Virginia

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Category—Rates

Rate states (also called administered pricing states):

• Publish full rates to cover all indemnity (lost wages) and medical benefits, as well as expenses

• Rate deviations to be filed/approved

Arizona Florida Idaho Iowa

Part5


Category—Rates and Loss Costs

Combined states:

• Publish both rates and loss costs, but the carrier decides which to use as the basis for its company rates

Illinois Indiana

Part5

13


Category—Relativities

• Texas Department of Insurance—Relativities• Publishes relativities, which are a set of

indices between classes

• NCCI State-Approved Loss Costs• Carriers have the option to use the loss costs

Texas

Part5


Premium Categories—All States

MT

NCCI Loss Cost

NCCI Combined Loss Cost/Rates

NCCI Rates

ND MNWA

OR ID WYSD

NV

CA

UT

AZ NM

CO

NE

KS

OK

TX

IA

MO

AR

LAMS AL GA

FL

SCNC

WI

IL IN OH PA

NY

ME

KYTN

WVVA

VT

NHMA

RICT

NJ

MD

DEDC

AK

HI

MI

Independent Bureaus

NCCI Loss Cost/Rate Relativities

Monopolistic

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Review• How does NCCI use the financial data that is

reported?

• What are the four premium categories/pricing mechanisms?

• What two states are combined states?

• Which of the following covers both losses and expenses—loss costs or rates?


General Reporting Requirements

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• Calls are reported on a carrier group level

• Exception: Texas reported at company level

Financial Calls

Group

Company Company Company

Part4


General Experience Types

Inclusions

• All workers compensation experience unless noted as an exclusion

Exclusions

• Experience you would generally exclude from the ratemaking Calls

Parts6 and 9

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Excluded Experience

Exclusions for ratemaking Calls:• Underground coal mine classifications (including

disease codes, e.g., black lung)• For Virginia, also exclude surface coal mine

• Excess workers compensation policies

• Federal classifications—however:• Include any USL&HW experience associated

with industrial classifications

• Maritime and other Federal Employer Liability Act (FELA) classifications—for policies effective 1/1/03 and subsequent

Parts6 and 9


Excluded Experience

More exclusions for ratemaking Calls:

• National Defense Projects Rating Plan

• Reinsurance Assumed

• Catastrophe and Terrorism Provision Premium (Statistical Codes 9740, 9741, or 9752)

• Large Deductible Policies• Except for Calls 20, 21, and 31—where large

deductible experience is reported for Florida

Parts6 and 9

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Excluded Experience—Guidebook Example Part

6


Financial Call Data Collected

Data Valued as of 12/31

Continued Expansion of Specific Rate-making Calls

Summary Row for All Prior Years

28 Calendar-Accident Years29 Policy Years

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Policy Year: 29 Years

Calendar-Accident Year:

28 Years


Financial Call Types

Policy Year

Premiums and losses for all policies with effective dates within that year

Example:Policies with effective dates January 1 to December 31, 2014:• Premium earned for those policies• For all claims that develop for these policies, report

under Policy Year 2014

Part4

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Policy Year 2014

Policy Year Example

7/1/13 Policy Effective Date

6/30/14 Policy Expiration Date

Policy Year 2012

Policy Year 2013

Calendar-Accident Year

2013


2014

For data valued as of 12/31/14:• Report premiums to which policy year?

• Report losses from 5/1/14 accident to which policy year?

5/1/14 Accident Date


Financial Call Types


Premiums earned within a calendar year and losses with accident dates occurring in that calendar year

Part4

Example: For Calendar-Accident Year 2014, include:• Premium earned during 2014• Claims with accident dates occurring in 2014

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Calendar-Accident Year Example

Calendar-Accident

Year 2013

Calendar-Accident

Year 2014

Premium7/1/13–6/30/14

Policy Effective Date

For data valued as of 12/31/14:

• Report premium transactions to CY:

Calendar-Accident

Year 2014

Calendar-Accident

Year 2013

Losses7/1/13–6/30/14

Policy Effective Date

• Report the 10/1/13 claim to AY:

10/1/13 Accident Date


Why Both Types of Calls?

Verify the consistency of the data: • Policy year vs. calendar-accident year—the way the

data is arranged and summarized • Calendar year totals should reconcile between the

policy year and calendar-accident year Calls

• Both Call types: historical data on earned premium, losses, claim counts, and expenses

• Used for analysis: loss ratios and emerging claimpatterns/trends

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Financial Call Market Types

• Voluntary Market • Pertains to insureds that (are able to) obtain

coverage through insurance companies

Voluntary Assigned Risk Statewide

• Assigned Risk Market• Pertains to insureds that cannot acquire

insurance in the voluntary market and must obtain coverage through a state-assigned risk plan or pool


Financial Data Calls

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Primary Ratemaking Calls

Policy Year Calls

3—Policy Year

3A—Policy Year—Assigned Risk

20—Policy Year LargeDeductible (FL only)

32A—Virginia Coal MinePolicy Year—Assigned Risk

32V—Virginia Coal Mine PolicyYear—Voluntary

Part4




Calls

5—Calendar-Accident Year

5A—Calendar-Accident Year—Assigned Risk

21—Calendar-Accident YearLarge Deductible (FL Only)

Part4

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8—Reconciliation Report

31—Large Loss and Catastrophe Call

33—VA Coal Mine Large Loss and Catastrophe Call

Part4


Supplemental Ratemaking Calls

6—Insurance Expense Exhibit (IEE)

10—Schedule Rating and Other Prospective Premium Adjustments

19—Accident Year Countrywide Loss Adjustment Expense

Part4

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Premium-Based and Residual Market Calls

1—Calendar Year Call for Workers Compensation Net Direct Written Premium

1A—Calendar Year Call for Direct Assignment Net Direct Written Premium

1B—Calendar Year Alternate Equivalent Premium

1C—Calendar Year Kansas Municipalities Premium Exclusion

1D—Calendar Year New Mexico Small Policy Exemption

Part4


State-Specific Calls

10T—TX Policy Year Call for Schedule Rating Modifications

14—Calendar Year Expense(AZ, NC, and VA)

26—NC Addendums for Calls 3, 5, and 19

Part4

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Compliance Forms

Self-Audit Form

Acknowledgment Form

Part11


Call Reporting Requirements Part4

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Call Reporting Requirements Part4

You are required to report Call 3 if you wrote workers compensation policies in a given state in 1986 and/or

any subsequent years.


What Do You Need to Report? Part9

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Call Due Dates Part2

* = Submitted hard copy ** = Subject to timeliness only in ADQIP


Review Time!

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Review

• What are the two compliance forms collected?

• True or False: Excess workers compensation policy experience is included in Call 3—Policy Year

• True or False: All Calls are due April 1

• Statewide data = _________ and ___________


Financial Call Components

Part5

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Report to the state of exposure

Report on a direct basis

Valued as of December 31

Reporting RequirementsPart5


Call Components

Premiums Losses

ExpensesClaim Counts

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PremiumsParts

5 and 7


Earned Premium Types

Designated Statistical Reporting (DSR) Level

Company Standard Level

Net

Part5

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DSR Level Premium

• As though business was written at NCCI-filed and state-approved loss cost or rate levels

• Includes NCCI’s experience rating modifications

• Benchmark level premium

• Used by NCCI for ratemaking

Parts5 and 7


Company Standard Premium

• At company rates


• Prior to the application of risk-specific adjustments

• Helps in verifying the accuracy of DSR premium

Part5

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Net Premium

• After the application of all adjustments


• Should reconcile to earned premium reported on National Association of Insurance Commissioners (NAIC) Annual Statement (state page data)

Part5


Call 5Call 5Call 3Call 3

Financial Call Premium

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Calculating DSR Level Premium

Two approaches:

• Extending exposures

• Deriving DSR level premium from company standard premium

Part7


DSR Level Premium—Other Considerations

• Combined Rate and Loss Cost States• Illinois and Indiana—DSR level is rates

• Relativity State• Texas—DSR level is relativities or loss

costs

Part7

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Premium Components Summary

Part5


Active Deviation

The effective date of your filed

LCM/deviation from rates

The effective date of NCCI’s rate or loss cost filing

The filed LCM/deviation

minus 1.000

(1.230 – 1.000)

A rolling multiplier (Y) indicates that you

automatically adopt NCCI’s rate or loss cost filing on the date it is

effective

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Losses Part5


Part5

Indemnity Medical

Reporting Losses

Replacement of lost wages

Medical care related to on-the-job injury

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Paid Losses and Case Reserves

Paid • Monies paid by insurance company for claims

• Monies set aside for future payments on specific claimsCase

Include losses from medical-only claims on the Calls


Reporting Losses—Other Items

SubrogationEmployers

Liability (Part II) Coverage

Independent Medical Exam

Deductible Reimbursements

Lump-Sum Settlements

Part5

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• Paid losses—reduced for actual subrogation amount

• Case reserves—can be offset by anticipated subrogation recoveries

Subrogation A type of loss recovery for a carrier where

losses paid are recovered from a third party

Part5



Defense and Cost Containment Expense (DCCE) associated with employers liability (Part II) coverage should be included with indemnity losses and not reported as a loss adjustment expense.

Losses—Employers Liability (Part II) Coverage

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• If required by an industrial board or commission, report as a medical loss

• If not required by an industrial board or commission, report as DCCE

Independent Medical Examination



Deductible Reimbursements

Lump-Sum Settlements

Reported on a gross basis, except in Kentucky, which is net

Allocate accordingly to indemnity and medical

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Paid Losses and Case OutstandingCall 3Call 3


Claim CountsPart5

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Indemnity Claim Counts

• Indemnity payment of at least $1 or

• Outstanding indemnity reserve of at least $1

Part5

Call 3Call 3Incurred

Indemnity Claim Count (8)

Incurred Indemnity

Claim Count (8)


IncludeIndemnity claims that are open, closed, or reopened

Indemnity claims for Policy Year 1993 and subsequent for all states*

*Texas exception—Policy Year 2007 and subsequent

Claim Count ReportingPart

5Claim could have

both indemnity and medical losses

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ExcludeMedical-only claims

Claims closed with no payment

Defense and Cost Containment Expense (DCCE)-only claims

Claim Count ReportingPart

5


Closed Claim Counts

• An indemnity claim paid in full with no reserves• A claim closed on the prior valuation, but

reopened as of the current valuation, must be removed from Column 9

Part5

Call 3

AccumulatedClosed (Paid)

(9)

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Open Claim Counts

• Indemnity claims with outstanding case or Defense and Cost Containment Expense (DCCE) reserves

• Closed claims (Column 9) + open claims (Column 10) = incurred claims (Column 8)

Part5Call 3Call 3

Open(Outstanding)

(10)


Claim Count

At all times: At all times:

Closed Claims

Open Claims

Incurred Claims

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Expenses Part5


Expenses

Loss adjustment expenses for:• Defense by the coverage provider (whether

a first-party or third-party claim) for litigation involving a claim

• Cost containment

Defense and Cost Containment Expenses (DCCE)

Part5

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DCCE ExpensesExamples:• Surveillance• Litigation management• Fixed amounts for cost containment• Fees or salaries for appraisers, private

investigators, hearing representatives, reinspectors, and fraud investigators—onlyif working in defense of a claim

• Attorney fees (to defend)

Part5

Exclude Adjusting and Other Expenses (AOE), such as fees of adjusters/settling agents(but not if a contentious defense) and attorney fees used in determining coverage


Part5DCCE Expenses

• Report DCCE paid and case

• For all states except Texas, required reporting for PY 1994 and subsequent

• Texas required for PY 2006 and subsequent

Call 3Call 3

AccumulatedPaid(11)

CaseOutstanding

(12)

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Calls 8, 31, and 10 Part9


Call 8—Reconciliation Report

• Reconciles the calendar year data reported to NCCI with the data reported on the carrier’s NAIC Annual Statement, Statutory Page 14

• Consists of calendar year direct premiums earned, direct losses (paid and incurred), and Direct Defense Cost and Containment Expenses (DCCE) paid

Part9

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Call 8—Reconciliation Report

Call 8 Line (1) comes directly from Calendar-Accident Year Call 5:

Call 5Call 5

Call 8Call 8


Call 8—Other Reconciliation Items

Excluded from NCCI Financial Call 5:

• Federal (F)-Classifications

• Maritime and Other FELA Classifications

• Underground Coal Mine Classifications

• National Defense Projects

• Large Deductible Experience

Part9

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Call 8—Reconciliation Items

Excluded from NCCI Financial Call 5:

• Small deductibles—losses and expenses only (difference between gross and net, except KY [a subtraction item])

• Excess policies

• Loss assessments (those excluded from losses reported to NCCI)

• Catastrophe premium (i.e., TRIA and DTEC)

Part9


Call 8—Reasons for Difference

• Possible Reasons for Difference:• Grouping differences―affiliates list• Earned But Unbilled Premium (EBUB) not

reported in the policy year or calendar-accident year Calls

• Reasons for Difference are addressed on lines 15–18

Note: Reasons for Difference explanation is not necessary if the difference is between:• +/– $5,000 for Premiums/Losses• +/– $50,000 DCCE

Part9

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Call 8—Example


Call 31—Large Loss andCatastrophe Call

• Provides the necessary claim detail to treat large losses and Extraordinary Loss Event (ELE) catastrophes in aggregate ratemaking at the state level

• Includes all claims for Accident Year 1984 and later, where total incurred losses are equal to or greater than $500,000 at the time of valuation; excludes DCCE payments and reserves

• Open, closed, or reopened claim status

Part9

49



Includes ELE claims that are assigned unique catastrophe numbers:

• Call 31 includes Catastrophe Numbers 14, 28, 48, 77, 87, and 93

• Do not report ELE or large loss claims when part of a large deductible policy• Exception: Florida

Part9



• A separate submission is required for each state• Texas does not report this Call

• Subset of Calls 3, 3A, 5, 5A, 20, and 21• Report on a consistent basis with the

policy year and calendar-accident year Calls

Part9

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Call 31—Example

The three market types reported within this Call are: 0—Assigned risk (other than large deductible)2—Large deductible (Florida only)3—Voluntary (other than large deductible)

Claim status is reported as one of the following:0—Open1—Closed2—Re-Opened

Part9


Call 10—Schedule Rating and Other Prospective Premium Adjustments Call

• Call 10—Policy year accumulated earned schedule rating adjustment for the most current five years

• Report adjustments at a company rate level

Part9

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Review Time!


Review

• Name the three premium levels reported in the Financial Calls. Also which one is used in the filing?

• On what basis should losses be reported—gross or net?

• What is the purpose of Call 8?

• What amount of incurred losses constitutes a large loss?

• Should closed claims for large losses be reported on Call 31 for subsequent valuations?

Part3

52


Recommended Workflow

Part3


Workflow Steps

Review/Update Deviation Information

Create Calls and Self-Audit Form

Preform Initial Validation

Address Edit Log

Revalidate Calls

Submit Calls

Submit Self-Audit Form

Submit Acknowledgment Form

Part3

53


Workflow Benefits

The recommended workflow assists you in reporting your data in two ways:

• Accuracy

• Efficiency

Part3


Workflow FlowchartPart3

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Active Deviation Review

• Essential for DSR level premium accuracy

• Financial data validator must make entries for prior policy years

Review and Update

Deviation/ Loss Cost Multiplier

Information


Active Deviation Example

Update Active Deviation

Loss Cost Multiplier = 1.690

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Call Creation

Create Financial Calls and Self-Audit

Form

Part3


Call Creation Example

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Call Validation

Validate Financial Call data

Part3


Call Validation

Edit Matrix—Sample Edit

Part3

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Call Validation Example


Edit Review

Review Edit Log

Are there edits?

Correct Call data or provide

explanations

YES

NO

Part3

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Edit Review

• Edit Log within Financial Data Collection• Financial Call Edit Matrix, Part 10 of the Financial

Call Reporting Guidebook


Edit Resolution/Explanation

• Correct data and/or

• Provide acceptable explanations to (critical to Aggregate Data Quality Incentive Program): Confirm data is correct Include specific details and amounts Address all edit components

• Revalidate

• Resolve Presubmission Edits

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Call Submission

Submit FinancialCall data

Part3


Compliance Forms

Submit completedSelf-Audit Form via Financial

Data Collection

Fax Acknowledgment Form with original

submission

Part11

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Part11

Self-Audit Form Part 1• Self-Audit Form is submitted within Financial

Data Collection on an annual basis• One form required per carrier group

(countrywide)• Confirmed Review• Does Not Apply• Qualified Review


Self-Audit Form Part 2

61


Acknowledgment Form

• Last step is submitting the Acknowledgment Form

• Hard copy only (primarily submitted via fax) and receipt date keyed in by NCCI

• Only a company officer, accredited actuary, or outside consultant can sign the form

• Applicable for all ratemaking Calls that are due April 1

• Submit before or on April 1 but after all ratemaking Calls due April 1


Acknowledgment FormExample Part

11

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Review—Workflow Flowchart

Yes

No

Or


Aggregate Data Quality Incentive Program (ADQIP)

Part11

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ADQIP

• Provides incentive to submit data in a timely and accurate manner

• Reallocates the impact of late and/or inaccurate reporting back to carriers through assessments

• Applies in all states where NCCI is the statistical agent for Financial Calls

Part11


ADQIP

• Applies to 17 Calls:

• Ratemaking Calls for timeliness and quality

• Premium-based billing, supplemental, and state-specific for timeliness only

• Applies to Two Forms:

• Acknowledgment Form

• Self-Audit Form

Part11

64


ADQIP—Timeliness and Quality

Policy Year Calls:

• 3, 3A, 20, 32A, 32V

Calendar-Accident Year Calls:

• 5, 5A, 21

Reconciliation Call:

• 8

Large Loss and Catastrophe Calls:

• 31, 33


ADQIP—Timeliness Only

Quality Forms:

• Acknowledgment and Self-Audit Forms

Premium-Based Billing Call:

• 1

Supplemental Calls:

• 10, 19

State-Specific Calls:

• 10T, 14, 26

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ADQIP

Incentive of early reporting credits:

• Applies to Calls 3 and 5 only

• Calls must be submitted by March 15

• Acknowledgment Form and Self-Audit Form must be received by April 1


ADQIP

Assessments for late and/or inaccurate data:

• Timeliness—per Call/form, per day, per state, based on each carrier’s state market share

66


ADQIP

Quality—per edit occurrence:

• Unaddressed edits are subject to an assessment of $300

• Corrected edits (to correct Call data by August 31) are subject to an assessment of $50

• Edits with incomplete/vague or no explanation are subject to a $50 assessment

• Edits that require a notification are subject to a $50 assessment


ADQIP

Edit assessment example:• A Call is submitted with an unaddressed edit• A notification is sent to advise that a correction

or complete explanation is required• The edit remains uncorrected, and the

explanation is left vague and incomplete

Result Amount ReasonIn this scenario, the assessment would be $400:

$300 Unaddressed edit+ $50 Blank explanation field+ $50 Notification

Maximum assessment = $400 per edit occurrence

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ADQIP—Other Details

• Consider all ADQIP program criteria• Data Quality Web page

• Link from the Financial Call Reporting Guidebook

• Includes details for Performance Reports (assessment letters) and Appeal Procedures

• Carriers can use the online Data Manager Dashboard to monitor Call submissions, timeliness, and quality assessment status


Carrier Data Quality Report Card

Annual Evaluation—the Carrier Data Quality Report Program (Report Card):

• Applies to ratemaking Calls as expected for each carrier group

• Issued at carrier group level

• A measure of timeliness and quality:• Grading:

• Timeliness—Grade is based on the average days late (grade of A–F)

• Quality—Grade is based on the average number of errors (grade of Pass or Fail)

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Data Quality Remediation Program

• Process where NCCI works with data providers to resolve significant data reporting issues

• Development of Remediation Program—as outlined in the Financial Call Reporting Guidebook, including:• Timeline for resolving issues• Objectives to meet data reporting standards• Regular communication between NCCI and

data provider• Regulatory monitoring/participation, if

warranted


Review Time!

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Review

• If you have an LCM of 1.690, how would you enter it in the Active Deviation screen in the Financial Data Collection Tool? _______

• True or False: It is best to create/validate your Calls on a Call-by-Call basis.

• How do you know if you have edits?

• True or False: “Correct as Reported” is a sufficientexplanation for an edit.


Supplemental Information

Presenter Biographies

Brian Barnett has worked at NCCI for 14 years. He is currently a senior data analyst for the Financial Data Team in the Data Resources Division. His primary duties include serving as a lead in the Quality Program and performing data validation for complex carriers.

Brian has a bachelor of science degree in geographic information systems from Florida Atlantic University.

Ferne Friedberg has been with NCCI for 12 years. She is currently a lead data analyst in the Data Resources Division. Previously, she worked in the Customer Operations Division as an experience rating analyst. Prior to joining NCCI in 2002, Ferne’s career was in the life insurance industry for more than 15 years, many of which were spent in life insurance underwriting.

basics of financial call data reporting requirements1—calendar year call for workers compensation...

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