Slide 1

New York Workers Compensation Reforms and Their Impact on Loss Development

Ziv KimmelVice President and Chief ActuaryNew York Compensation Insurance Rating Board

CAGNY 2015 SPRING MEETING

OverviewMajor New York Workers Compensation (WC) ReformsPricing of Reform ElementsAdjusting Loss Development to Reflect Reforms

Elimination of Special Disability FundIncrease in Maximum Weekly BenefitCaps on Permanent Partial Disability Duration (PPD)PPD Claims Into Aggregate Trust FundMedical-Related ProvisionsSystem Improvements

Major Components of the 2007 ReformsThe 2008 ReformEffective 10/1/2008End of Administered PricingLoss Costs LCMsNYCIRBs governing structure

The 2013 ReformRevised Assessment ProcessClosing of the Reopened Case Fund

Actual Assessment Data From State WC BoardRelate Assessments to Paid LossesMitigation / Efficiency FactorIndemnity Impact:+17.8%Total Impact: +13.3%

Elimination of Special Disability FundFratello MethodRecognition of Varying Wage Levels by Injury TypeIncreased System Utilization

Increase in Maximum Weekly Benefit

Effective Date Max Weekly Benefit Overall Impact 7/1/2007$500 6.0%7/1/2008$550 1.9%7/1/2009$600 1.5%7/1/2010$740 4.1%7/1/2011$773 0.8%7/1/2012$792 0.3%7/1/2013$803 0.2%7/1/2014$8090.1%7/1/2015$8440.4%Total To Date16.2%Increase in Maximum Weekly BenefitImpact% Loss of Earnings = # Weeks of BenefitsActual PPD Data From State WC BoardDistribution of Loss of EarningsPPD Settlement ConsiderationsHardship ProvisionTotal Impact: -28%

Caps on PPD Duration

Loss of Earning %Number of WeeksGreater than 95%52590% to 95%50085% to 90%47580% to 85%45075% to 80%42570% to 75%40060% to 70%37550% to 60%35040% to 50%30030% to 40%27515% to 30%250Less than 15%225

Benefit Duration by Impairment Ratings

Loss of Earning percentageNumber of WeeksSelected DistributionPercentage SavingsLump sum CasesOther CasesGreater than 95%5250.5%17.0%33.5%90% to 95%5000.5%18.5%34.2%85% to 90%4752.4%20.0%35.0%80% to 85%4502.4%21.5%35.7%75% to 80%42510.1%46.1%73.0%70% to 75%40010.1%49.1%74.6%60% to 70%37519.9%52.2%76.0%50% to 60%35015.8%55.3%77.6%40% to 50%30021.5%61.4%80.7%30% to 40%2758.2%64.5%82.3%15% to 30%2506.4%67.7%83.9%Less than 15%2252.0%70.9%85.4%Average54.2%75.6%Total Average Savings on Perm. Partial Non Schedule71.3%Total Average Savings on Perm. Partial50.5%Total Impact-28.0%

Final Calculation

Reflection of Reforms in Subsequent Filing

Back to BasicsWhats in the Reported Data?Pre-Reform vs. Post Reform

Historical loss development information is primarily pre-reformOK to use it if we assume losses are at pre-reform levelsNeed adjustment if applying loss development factors (LDF) to losses at post reform levelsPaid vs. Paid + Case

Loss Development Adjustment

Duration Cap Development Adjustments

Reported Indemnity Paid Loss Development TrianglePY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT19911.0151.16419921.0171.0141.16219931.0161.0101.0131.16519941.0161.0131.0151.0131.16119951.0161.0121.0131.0111.0111.16219961.0171.0161.0151.0131.01119971.0201.0181.0161.0161.01419981.0211.0161.0201.0151.01519991.0291.0191.0211.0191.02020001.0291.0241.0221.0191.02020011.0511.0331.0321.0251.02020021.1001.0381.0331.0331.01720031.1351.0951.0501.0421.02820041.1461.1291.0901.0531.03920051.1671.1101.1301.0851.03720061.2911.1701.1131.1281.07820071.4561.2471.1741.1091.12520082.2001.4801.2711.1921.09620092.1501.4711.2581.14920102.1591.5061.24020112.1451.45920122.111

Note: Numbers shown in this exhibit are for illustration purposes only15Restating the Loss Development Factors: Example(1)Reported PY 2002 7th to 8th link ratio1.100(2)Development portion0.100(3)% of Non Scheduled out of total PPD66.7%(4)% of PPD out of total indemnity86.6%(5)% Non Scheduled out of indemnity (3)x(4)57.8%(6)Development portion that is NSPPD (2)x(5)0.058(7)Development portion that is other than NSPPD (2)-(6)0.042(8)*% of cases affected by limited duration25%(9)Restated NSPPD Development portion (6) x [1-(8)]0.043(10)Restated PY 2002 7th to 8th link ratio 1+(9)+(7)1.086Row (8) assumes at this point in the development, 25% are cases are now limited, whereas before they were still developing. 75% of the cases are still developing at this point in the triangle, even after the reform, as they still haven't reached the maximum duration. These assumed percentages can be found on the top of each column of the "restated" triangles. The percentages are based on a distribution of severities obtained from the Workers Compensation Board.

Note: Numbers shown in this exhibit are for illustration purposes onlyRestated Indemnity Paid Loss Development TrianglePY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT% Cases affected0000 5 15 25 40 55 70 75 80 85 90 95 95 95 95 95 19911.0071.07419921.0081.0061.07319931.0071.0051.0061.07519941.0071.0061.0071.0061.07319951.0081.0061.0061.0051.0051.07319961.0091.0081.0071.0061.00519971.0111.0091.0081.0071.00719981.0121.0091.0101.0071.00719991.0171.0111.0111.0101.00920001.0201.0141.0131.0101.01020011.0391.0231.0191.0141.01120021.0861.0291.0231.0201.01020031.1231.0811.0381.0291.01720041.1421.1181.0771.0411.02720051.1671.1071.1191.0731.02820061.2911.1701.1111.1201.07020071.4561.2471.1741.1091.12520082.2001.4801.2711.1921.09620092.1501.4711.2581.14920102.1591.5061.24020112.1451.45920122.111

Note: Numbers shown in this exhibit are for illustration purposes onlyReform Development Adjustment Summary1st to 19th 19th to Ultimate1st to Ultimate AdjustmentTotal Full Year AdjustmentReportedRestatedAdjustmentReportedRestatedAdjustment7.9217.0960.8961.1621.0730.9230.827-17.3%

Note: Numbers shown in this exhibit are for illustration purposes onlySpecial Disability Fund (SDF)Development Adjustments

Reported Indemnity Paid + Case Loss Development Triangle Evaluated as of 2008PY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT19840.9991.04019851.0001.0151.04019861.0090.9971.0091.04019871.0191.0041.0161.0191.04019881.0020.9791.0171.0120.9911.04019891.0120.9961.0151.0090.99919901.0051.0061.0281.0070.99819911.0021.0131.0311.0100.99919921.0031.0191.0311.0131.00019930.9911.0221.0271.0101.00319941.0081.0241.0381.0171.00919950.9991.0231.0181.0141.00619961.0051.0241.0271.0161.00819971.0431.0531.0141.0191.00819981.0741.0701.0371.0021.01519991.0931.0731.0321.0231.03820001.2721.1211.0721.0361.03620011.5861.2891.1751.0621.06620021.4191.1811.0681.06920031.3881.1691.11620041.4071.21420051.392

Note: Numbers shown in this exhibit are for illustration purposes onlyRestating the Loss Development Factors: Example(1)Reported PY 1997 5th to 6th link ratio1.043(2)% of indemnity claims were subject to the SDF elimination5.8%(3)% of claims accepted by theSDF at each development age60.1%(4)% of all claims that were accepted by theSDF at each development age (2)x(3)3.5%(5)% of all claims that were not accepted by theSDF at each development age 1-(4)96.5%(6)Adjustment Factor* 1.189(7)Restated PY 1997 5th to 6th link ratio (1)x(4)x(6)+(1)x(5)1.050*The adjustment factor is determined by restating the reported loss development triangle which consists entirely of pre-reform years so that the restated LDF to ultimate is 17.8% higher than the original LDF to ultimate.

Note: Numbers shown in this exhibit are for illustration purposes onlySDF Acceptance RateYear Claims were AcceptedAccident Year1998199920002001200220032004200520062007200820092010201120122013Total by Accident Year199815629817416944032651023816613490533322932,8211999-881061294343525064432951961697368341472,9142000--2056258441542400401269239140755814112,9242001---16792635084114404113912281379241153,0322002----10873113344504105703131809354252,8372003-----108516235835349042823418363232,3892004------1121152289434414332195104331,9852005-------629106308346265236150431,4892006--------216138286271212203631,1912007---------1197812811310039478TOTAL by Acceptance Year1563863003701,2211,4792,4732,0152,2932,1852,8482,3591,7231,23875226222,060Years of DevelopmentAccident Year12345678910111213141516Ultimate19981564546287971,2371,5632,0732,3112,4772,6112,7012,7542,7872,8092,8182,8212,823 1999881943237571,1091,6152,0582,3532,5492,7182,7912,8592,8932,9072,9142,917 200020763347751,3171,7172,1182,3872,6262,7662,8412,8992,9132,9242,935 200116953588661,2771,7172,1282,5192,7472,8842,9763,0173,0323,060 200210974087421,1921,6022,1722,4852,6652,7582,8122,8372,888 200310952576159681,4581,8862,1202,3032,3662,3892,474 200411321844739071,3211,6531,8481,9521,9852,107 20056351414497951,0601,2961,4461,4891,649 20062181564427139251,1281,1911,416 200712098226339439478640 Years of DevelopmentAccident Year1234567891011121314151619986%16%22%28%44%55%73%82%88%93%96%98%99%100%100%100%19993%7%11%26%38%55%71%81%87%93%96%98%99%100%100%20001%3%11%26%45%58%72%81%89%94%97%99%99%100%20011%3%12%28%42%56%70%82%90%94%97%99%99%20020%3%14%26%41%55%75%86%92%96%97%98%20030%4%10%25%39%59%76%86%93%96%97%20041%2%9%22%43%63%78%88%93%94%20050%2%9%27%48%64%79%88%90%20060%1%11%31%50%65%80%84%20070%3%15%35%53%69%75%Average AY1.2%4.4%12.5%27.6%44.3%60.1%74.9%84.2%90.3%94.2%96.6%98.2%99.1%99.6%99.9%99.9%Restated Indemnity Paid + Case Loss Development Triangle Evaluated as of 2008PY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT% Cases affected4.4%12.5%27.6%44.3%60.1%74.9%84.2%90.3%94.2%96.6%98.2%99.1%100.0%100.0%100.0%100.0%100.0%100.0%100.0%19841.0101.05119851.0111.0261.05119861.0201.0081.0201.05119871.0301.0151.0271.0301.05119881.0130.9901.0281.0231.0021.05119891.0231.0071.0261.0201.01019901.0161.0171.0391.0181.00919911.0131.0241.0421.0211.01019921.0141.0301.0421.0241.01119931.0011.0331.0381.0211.01419941.0181.0351.0491.0281.02019951.0081.0331.0291.0251.01719961.0131.0331.0371.0271.01919971.0501.0621.0231.0291.01819981.0791.0771.0461.0111.02519991.0961.0781.0391.0311.04820001.2741.1241.0771.0431.04520011.5871.2911.1791.0671.07320021.4201.1831.0711.07420031.3891.1711.11920041.4081.21620051.393

Note: Numbers shown in this exhibit are for illustration purposes onlyReported Indemnity Paid + Case Loss Development Triangle Evaluated as of 2014PY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT19911.0021.03219921.0091.0061.03219931.0061.0041.0021.03219941.0101.0041.0041.0041.03219951.0041.0051.0041.0031.0031.03219961.0091.0051.0051.0031.00219971.0091.0041.0051.0031.00119981.0011.0041.0021.0021.00419991.0021.0051.0071.0031.00620001.0181.0081.0071.0051.00820011.0291.0151.0181.0031.00620021.0241.0111.0201.0151.00920031.0341.0181.0241.0101.01320041.0711.0401.0211.0271.01120051.0771.0381.0281.0211.01320061.1131.0581.0681.0261.01720071.2261.1091.0501.0371.01120081.4511.2491.1141.0431.02320091.5261.2001.1151.03520101.5091.2191.08920111.5131.20720121.495

Note: Numbers shown in this exhibit are for illustration purposes onlyRestated Indemnity Paid + Case Loss Development Triangle Evaluated as of 2014PY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT% Cases affected4.4%12.5%27.6%44.3%60.1%74.9%84.2%90.3%94.2%96.6%98.2%99.1%100.0%100.0%100.0%100.0%100.0%100.0%100.0%19911.0131.04319921.0201.0171.04319931.0171.0151.0131.04319941.0211.0151.0151.0151.04319951.0151.0161.0151.0141.0141.04319961.0201.0161.0161.0141.01319971.0201.0151.0161.0141.01219981.0121.0151.0131.0131.01519991.0131.0161.0181.0141.01720001.0291.0191.0181.0161.01920011.0391.0251.0291.0141.01720021.0331.0211.0311.0261.02020031.0421.0271.0341.0201.02420041.0781.0491.0301.0371.02120051.0821.0451.0361.0301.02320061.1161.0621.0741.0331.02520071.2261.1091.0511.0381.01220081.4511.2491.1141.0431.02320091.5261.2001.1151.03520101.5091.2191.08920111.5131.20720121.495

Note: Numbers shown in this exhibit are for illustration purposes onlySDF Impact in The 2015 Filing (1)Reported 1st to 19th development factor2.546(2)Restated 1st to 19th development factor2.931(3)Adjustment factor for 1st to 19th (2)/(1)1.151(4)Reported 19th to ultimate factor1.032(5)Restated 19th to ultimate factor1.043(6)Adjustment factor for 19th to ultimate (5)/(4) 1.011(7)Total development adjustment factor (3)x(6)1.16416.4%

Note: Numbers shown in this exhibit are for illustration purposes onlyDoubly Adjusted Triangle

REPORTED INDEMNITY PAID + CASE TRIANGLEPY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/2020/ULT1.0081.02919911.0021.0051.02919921.0091.0061.0041.02919931.0061.0041.0021.0011.02919941.0101.0041.0041.0041.0041.02919951.0041.0051.0041.0031.00319961.0091.0051.0051.0031.00219971.0091.0041.0051.0031.00119981.0011.0041.0021.0021.00419991.0021.0051.0071.0031.00620001.0181.0081.0071.0051.00820011.0291.0151.0181.0031.00620021.0241.0111.0201.0151.00920031.0341.0181.0241.0101.01320041.0711.0401.0211.0271.01120051.0771.0381.0281.0211.01320061.1131.0581.0681.0261.01720071.2261.1091.0501.0371.01120081.4511.2491.1141.0431.02320091.5261.2001.1151.03520101.5091.2191.08920111.5131.20720121.495Reported Indemnity Paid + Case Triangle

Note: Numbers shown in this exhibit are for illustration purposes onlyRESTATED TRIANGLE POST DURATION CAP ADJUSTMENTPY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/2020/ULT% Cases affected051525405570758085909595959595959595951.0041.01319911.0011.0021.01319921.0041.0031.0021.01319931.0031.0021.0011.0001.01319941.0051.0021.0021.0021.0021.01319951.0021.0021.0021.0011.00119961.0041.0021.0021.0011.00119971.0041.0021.0021.0011.00019981.0001.0021.0011.0011.00219991.0011.0021.0031.0011.00320001.0101.0041.0031.0021.00420011.0161.0081.0091.0011.00320021.0141.0061.0111.0081.00420031.0231.0111.0141.0051.00720041.0551.0271.0131.0151.00620051.0661.0291.0191.0131.00720061.1061.0521.0571.0201.01220071.2261.1091.0501.0371.01120081.4511.2491.1141.0431.02320091.5261.2001.1151.03520101.5091.2191.08920111.5131.20720121.495Duration Cap Adjusted Indemnity Paid + Case Triangle

Note: Numbers shown in this exhibit are for illustration purposes onlySDF & Duration Cap Adjusted Indemnity Paid + Case TriangleRESTATED TRIANGLE POST SDF ADJUSTMENTPY1/22/33/44/55/66/77/88/99/1010/1111/1212/1313/1414/1515/1616/1717/1818/1919/ULT% Cases affected4.4%12.5%27.6%44.3%60.1%74.9%84.2%90.3%94.2%96.6%98.2%99.1%100.0%100.0%100.0%100.0%100.0%100.0%100.0%19911.0121.02819921.0151.0141.02619931.0141.0131.0121.02619941.0161.0131.0131.0131.02419951.0131.0131.0131.0121.0121.02619961.0151.0131.0131.0121.01219971.0151.0131.0131.0121.01119981.0111.0131.0121.0121.01319991.0121.0131.0141.0121.01420001.0211.0151.0141.0131.01520011.0261.0191.0201.0121.01420021.0231.0161.0221.0191.01520031.0311.0201.0241.0151.01820041.0621.0361.0221.0251.01620051.0711.0361.0271.0221.01720061.1091.0571.0631.0271.02020071.2261.1091.0511.0381.01220081.4511.2491.1141.0431.02320091.5261.2001.1151.03520101.5091.2191.08920111.5131.20720121.495

Note: Numbers shown in this exhibit are for illustration purposes onlySDF Impact of 16.4% Is Then Maintained (1)Restated 1st to 19th development factor post Duration Cap adjustment2.382(2)Restated 1st to 19th development factor post Duration Cap & SDF adjustments2.741(3)Adjustment factor for 1st to 19th (2)/(1)1.151(4)Restated 19th to ultimate factor post Duration Cap adjustment1.015(5)Restated 19th to ultimate factor post Duration Cap & SDF adjustments1.026(6)Adjustment factor for 19th to ultimate (5)/(4) 1.011(7)Total development adjustment factor (3)x(6)1.16416.4%

Note: Numbers shown in this exhibit are for illustration purposes only

SummaryReform adjustment depends on the reported dataAdjustments can be part of on-level factors or as part of development factorAdjust one triangle at a timeThe devil is in the details

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Questions?33