#1MWCIA Minnesota Workers' Compensation Insurers Association MWCIA years 1#2Minnesota Workers' Compensation State of the Market 2021 MWCIA years 2#3Change (%) 15 10 5 -5 Minnesota and Countrywide Premium Changes 10.2 10.6 10.9 9.6 8.2 8.0 5.3 5.1 5.7 4.0 3.7 1.4 -6.4 ■Minnesota Countrywide .8 -.5 -.5 -1.6 -3.1-3.0 Comments ■ Unlike last year, Minnesota saw a decrease in direct written premium in 2020. The change was mild compared to the decline seen in the industry countrywide. Minnesota The average insurer rates decreased in 2020. ■ There was a modest increase in payroll, but was substantially less than the payroll growth seen in recent years. -10 2011 2012 2013 2014 2015 2016 2017 Calendar Year 2018 2019 -8.9 2020 A.M. Best's Market Share Reports/One Year Premiums and Loss Study, based on DWP MWCIA years 3#4$ Millions Premium Volume 1200 Assigned Risk Plan 1092 ■Voluntary Market 1049 1027 996 968 985 1000 931 947 861 774 800 600 400 200 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year Direct Earned Premium AM Best State of the Line Report 3.5% Comments ■ The voluntary market calendar year 2020 earned premium was 3.9% lower than 2019 earned premium. ■ The premium earned in the voluntary market has decreased by an annual average of 3.5% since the peak in 2016. MWCIA years +#570 0 60 60 Assigned Risk Plan Premium 50 45 $ Millions 800 00 40 00 58 60 60 62 62 55 43 42 35 35 15% 12% 9% 34 34 32 6.2% 6.2% 30 5.9% 5.2% 5.0% 6% 20 20 4.1% 4.2% 4.2% 3.5% 3.5% 3% 10 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Calendar Year Actuarial Advisors', Inc Final Reserve Report, Net Earned Premium 0% Market Share MWCIA years Comments ■ 2020 market share is consistent with calendar year 2019, maintaining the lowest level seen in a decade. Assigned Risk premium peaked in 2015 and has decreased by 46% over the last 5 years. 5#610 8 00 + 2 о 1.0 4.0 Industry Group Payroll Changes 8.0 سسسل 5.0 Comments Since 2017 ■ Payroll growth averaged 5% statewide. ■ At 4.4% of PY 2018 payroll, Contracting is increasing much faster than the statewide average. Annual Average Change (%) ≈ + -1.5 Manufacturing Contracting Office & Clerical (9.1%) (4.4%) (65.0%) ■Ratemaking Cycle 2009 to 2017 Goods & Services Miscellaneous (3.8%) Statewide (17.7%) ■Ratemaking Cycle 2017 to 2022 Payroll over latest five Policy Years obtained from Minnesota Unit Statistical Plan Data MWCIA years 6#79 Annual Change (%) о 5 + Industry Group Payroll Changes Comments ■ Contracting payroll growth has slowed slightly in recent ratemaking cycles, though still faster than other industries. Manufacturing was the second fastest growing industry group in the 2018 ratemaking cycle, but has been the slowest growing group since. 2022 3 2018 2019 2020 2021 Ratemaking Cycle Manufacturing Goods & Services -Contracting -Miscellaneous Payroll over latest five Policy Years obtained from Minnesota Unit Statistical Plan Data Office & Clerical -Statewide MWCIA years#8Percent Change (%) LO Pure Premium Base Rate Changes 2.0 -6.7 1.2 -.8 -2.5 -5 -10 -12.1 -15 3.0% ■Individual -20 -Cumulative -25 -30 -.4 -1.2 -6.5 -26.2 Comments ■ The 2022 Ratemaking Report reflects a 6.5% decrease in pure premium base rates on average. ■ All industry groups saw a decrease, except Office and Clerical which had a small increase of 0.8%. Since 2012, pure premium base rates have decreased at an annual average rate of 3%. ■ Cumulatively, pure premium base rates are 26.2% below the 2012 level. 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Year MWCIA years 8#9Statewide Average Pure Premium Rate .95 .92 Comments ■ The statewide average pure premium rate dropped by 26% during this same ten year time period. ■ In the last five years, statewide average pure premiums decreased 13%. .70 Average Pure Premium 770 .75 .80 00 .85 85 .90 90 .68 .65 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Year Unit Statistical Data used in the 2013-2022 Ratemaking Reports MWCIA years 9#103 Average Pure Premium Rates ($) N Industry Group Average Pure Premiums ■2017 Pure Premiums ■2022 Pure Premiums 53¢ 3.46 2.93 2.85 2.65 Comments ■ Goods & Services has the largest pure premium decline in the last 5 years at 16.4%. Contracting has seen the largest magnitude decrease at 53 cents. .78 .68 1.65 1.51 1.50 1.26 .16 .13 Statewide (-13.1%) Manufacturing (-8.4%) Contracting (-15.2%) Office/Clerical (-15.5%) Goods/Services (-16.4%) Miscellaneous (-7.0%) Industry Groups MWCIA MWCIA Unit Statistical data used for 2017 and 2022 Ratemaking Reports years 10#11Percent 75 70 70 68 65 60 55 50 50 45 45 Loss Ratios →Minnesota -Countrywide 56 47 Comments ■ Both Minnesota and the countrywide workers' compensation industry saw loss ratios increase by 3% in 2020. Previous charts show that premiums, the denominator of the loss ratio, decreased slightly. A premium decrease would drive the ratio up. Subsequent charts will look at the numerator, losses, to dig into the loss ratio increase. 40 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Calendar Year Loss Ratios cited from the AM Best State of the Line Report MWCIA years 11#12Cumulative Change Indemnity Severity Changes 40% 35% -Minnesota 30% -State Average Weekly Wage 25% 20% 15% 10% 5% 0% 2010 2011 2012 2013 2014 2015 2016 Accident Year 2017 Minnesota series from MWCIA Financial data State Average Weekly Wage from Minnesota Department of Labor and Industry Excluding COVID-19 Claims 37.5% 30.2% 2018 2019 2020p Comments Average Indemnity Severity ■ The average indemnity severity in 2020 is nearly the same as 2019 with a small half-percent decrease. ■ Note, this number excludes COVID-19 claims. State Average Weekly Wage The SAWW was increasing steadily until 2019, but jumped 7.7% in 2020. ■This is an effect of the pandemic. Subsequent charts will dig into this. MWCIA years 12#13Annual Change 150% 100% 50% 0% -50% 1979 Change in Unemployment Rate -Minnesota -United States 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 € 2021 September Year Local Area Unemployment Statistics (LAUS) and Minnesota Department of Employment and Economic Development MWCIA Comments ■ Minnesota's unemployment rate nearly doubled in 2020. ■ Minnesota is recovering faster than the countrywide rebound. The unemployment rate in Minnesota is approximately the same as in early 2020. ■ Labor force participation in Minnesota increased each month in 2021 through July. The rate fell slightly in August and September. years 13#142019-2020 Employment and Wage Changes Leisure and Hospitality Other Services Information Professional and Business Services Trade, Transportation and Utilities Manufacturing -25.9% 4.4% -15.4% 11.2% -7.8% 9.9% -5.8% 6.2% -5.0% 6.5% -4.6% 4.1% -4.0% 8.9% -3.8% 5.5% -2.4% 4.6% -1.7% 7.5% Employment=0.1% Natural Resources 0.5% 7.7% Statewide -6.8% Public Administration Education and Health Services Construction Financial Activities ■Employment ■Average Weekly Wage Quarterly Census of Employment and Wage data from Minnesota Department of Employment and Economic Development MWCIA years Comments ■ The increase in the SAWW can be explained by where these employment losses occurred. Minnesota experienced more employment declines in lower wage positions, driving the average salary up from the change in workforce composition. ■This is broadly seen across groups, with the exception of Natural Resources that was minutely affected on both metrics. ■ Not surprisingly, Leisure and Hospitality faced the largest decline in employment. 14#15$ Thousands 28 20 Indemnity Severity -Minnesota 26 26 -NCCI States 24 24 22 22 21.5 6920 18.6 18 16 2011 2012 2013 2014 Countrywide series from NCCI AIS State of the Market Minnesota series from MWCIA Financial data Excludes COVID-19 claims 3.7% 3.4% 2015 2016 Accident Year 25.4 23.2 (Excl CV-19) ▲ 18.4 (Incl CV-19) Comments Indemnity severity growth for NCCI states averaged 3.7% per year since 2016, where we see an uptick in the average. Similarly, Minnesota has increased an average of 3.4% per year since 2016, but remained nearly flat in 2020 with the average indemnity severity decreasing by $91. Incorporating COVID-19 claims drags the average down to just below the 2011 level. 2017 2018 2019 2020p MWCIA years 15#16Cumulative Change 20% 15% 10% 5% Lost-Time Medical Severity Changes -Minnesota -Chain-Weighted Personal Health Care Price Index 15.8% AM 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 Accident Year 5.5% 2019 2020p Comments Though volatile, the average medical claim severity in lost-time claims wobbles around the Chain-Weighted Personal Healthcare Price Index, with the average severity falling in 2020. ■ Since 2010, the index grew an average of 1.5% per year. ■ Lost-time medical severity averaged growth of half a percent per year. Minnesota series from MWCIA Financial data. Countrywide Chain-Weighted Personal Health Care (CW-PHC) Price Index from Centers for Medicare & Medicaid Services Excludes COVID-19 claims MWCIA years 16#1730 50 28 28 $ Thousands Lost-time Medical Severity 26 24.3 24 24 21.6 22 20 20 -Minnesota -NCCI States 3.4% 28.3 21.7 Excl CV-19) 17.0 (Incl CV-19) 2019 2020p MWCIA years Comments NCCI States ■ The averages for NCCI states remained fairly stable from 2011 to 2015. ■ From 2015 to 2019, NCCI average lost-time medical severities increased an average of 3.4%. ■ The average for NCCI states remained flat in 2020. Minnesota Minnesota average lost-time medical severities have been nearly flat across the time period, fluctuating between 21 and 24 thousand dollars over the decade. ■ Once again, incorporating COVID-19 claims plummets the average. This is largely due to many COVID-19 lost- time claims not having corresponding medical payments. This will be discussed in the COVID-19 section. 18 16 2011 2012 2013 2014 2015 2016 2017 Accident Year 2018 Countrywide series from NCCI AIS State of the Market Minnesota series from MWCIA Financial data Excludes COVID-19 claims 17#18Annual Frequency Changes 4 2 .7 0 2.9 .033 -.8 -.9 -.9 Change (%) DŃ -2 -1.5 -2.8 -4 -3.7 -3.9 -4.0 -6 -5.8 -4.5 -5.0 -5.9 -6.3 -4.3 -7.0 -8 -10 ■Minnesota ■NCCI States -12 -11.5 -13.3 -14 2011 2012 2013 2014 2015 2016 2017 2018 Accident Year 2019 2020p NCCI states series presented at the 2021 Annual Issues Symposium Minnesota series from MWCIA Financial data Excludes COVID-19 cases MWCIA years Comments ■ Here pandemic impacts are seen in the data; Lost-time frequency declined 13% in Minnesota in 2020. ■ Minnesota saw a steeper change than NCCI states. ■ The change in frequency during 2020 is the largest decline of the decade for both Minnesota and NCCI states. 18#1930 30 25 20 20 Cases Per $1M Pure Premium 11 15 10 Regional Frequency 27.8 24.8 23.6 22.7 22.0 21.3 19.5 18.3 18.0 16.7 15.5 22.8 21.0 21.2 18.3 17.7 5 0 Comments ■ Cases per $1M of pure premium show frequency decreases across all regions in Minnesota. ■ The two Western regions experienced the largest declines. These areas far exceed the statewide average decline of 18.4% since policy year 2014. Metro Extended Southeast Southwest Central (-16.1%) Metro (-21.4%) (-29.8%) (-19.5%) (-19.9%) ■Policy Year 2014 Minnesota Unit Statistical Plan Data Region Northeast Northwest Statewide (-9.8%) (-37.4%) (-18.4%) Policy Year 2018 MWCIA years 19#20Reserves ($ Millions) 100 80 60 40 20 Indemnity Case Reserve Changes 76 78 72 72 67 67 66 63 64 62 -20 -14 -14 -12 -18 -21 -24 -22 -40 -30 -33 -33 -60 2011 2012 2013 2014 2015 2016 2017 2018 Calendar Year 2019 2020 ■Latest AY ■Prior AYS Net Reserve Impact Case reserves based on MWCIA Financial data MWCIA years Comments ▪ The reserves posted for the latest accident year are the lowest in the last five years. ■ Takedowns of reserves on prior accident years were the largest in the last five years. ■ The net indemnity reserve activity in 2020 is similar to what was seen in 2014. 20 20#21200 Medical Case Reserve Changes Reserves ($ Millions) 0 50 100 150 183 160 158 157 157 156 143 142 142 31 21 27 20 16 3 5 -4 -5 140 -50 2011 2012 2013 2014 2015 2016 2017 2018 2019 -42 2020 Calendar Year Latest AY ■ Prior AYs ■Net Reserve Impact Case reserves based on MWCIA Financial data MWCIA years Comments ■ Medical reserves for the latest accident year are the lowest seen in the last decade. ■ The change of medical reserves on prior accident years is the greatest takedown of the last decade. ■ The net change is a net reserve decrease of $42M, much larger than typically seen. 21 221#2250 50 Case Reserve Changes Indemnity 31 27 25 21 16 -25 -21 -24 5 3 ■Medical 20 TT -5 -4 -12 -14 -14 -18 -22 -33 -33 -30 Comments ■ Summarizing the change in case reserves, the net reserve change was a $72 million decrease. ■This is the largest decrease seen in the net reserve change in 29 years. This loss information is puzzling, given the loss ratio increase. The metrics showed: loss frequency decreased severities remained stable or decreased indemnity and medical case reserves decreased What is going on with the loss ratio? -42 -50 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Calendar Year Case reserves based on MWCIA Financial data MWCIA years 22 22#23Reserves ($ Millions) 400 IBNR Plus Bulk Reserve Changes 365 347 337 314 317 315 318 300 200 100 112 70 48 40 0 -4 1 12 301 303 296 -43 102 -100 2011 2012 2013 2014 2015 2016 2017 2018 Calendar Year 2019 2020 ■ Prior AY Latest AYS ■Net Reserve Impact MWCIA Case reserves based on MWCIA Financial data years Comments ...IBNR and Bulk Reserves ■ IBNR and Bulk Reserves contributes to the loss ratio increase seen in Minnesota. ■ The net increase in IBNR and Bulk reserves in 2020 exceeds the net indemnity and medical reserves released. ■ The net increase is suspected to reflect uncertainty around the pandemic. 23 23#24Key Takeaways Stable Assigned Risk Plan IBNR & Bulk Reserves Average Pure Premium Declines SAWW Increase Pandemic Impacts Comments ■ Assigned risk premiums decreased and market share remained constant. ■ The IBNR and Bulk Reserves net increase drove the 3% loss ratio increase in Minnesota. ■ Average pure premiums declines are seen across all industry groups. ■ The SAWW increase is driven by employment mix changes. ■ Pandemic impacts are starting to be visible. MWCIA years 24 14#25COVID-19 Minnesota Statistics MWCIA years This next section will discuss: 1. Pandemic considerations for the 2022 Ratemaking Report. 2. COVID-19 specific metrics 25#26. 2022 Ratemaking Report Experience Indication • Based on PY 17&18 and AY 18&19 • Same time periods as the 2021 Report Split Trend Period • 4/1/2019 3/31/2020 . ⚫ Full Selected Trend • Half Selected Trend • 4/1/2020 - 1/1/2023 MWCIA years Comments ■ The 2022 Ratemaking Report contemplated the pandemic in two 1. 2. ways: The experience indication used in ratemaking for 2022 was developed from Policy Years 2017 and 2018 and Accident Years 2018 and 2019. This is the same period as the 2021 Ratemaking report and also pre-pandemic. Experience during the pandemic is not expected to be predictive of the future. Once again, a split trend period was used to account for uncertainty and differences during the trend period. The first period is pre-pandemic. The second period represents the pandemic era and recovery. Half of the pre-pandemic trend was selected during the second period to represent some recovery but also reflect the uncertainty around timing. 26#27First Report Cases (Thousands) T CO 5 + 3 Jan 20 Feb Monthly Claim Filings Mar Apr May Jun July Aug Sept Oct Nov years Comments ■ First report of injury data from the DLI shows Non-COVID claims fell compared the same month the previous year, with the exception of April and May 2021. Recently, non-COVID claims have rebounded to the levels seen a year prior. ■ COVID claims follow the infection waves seen in Minnesota. ■ COVID claims made up the majority of claims reported November through January, coinciding with winter surge here in Minnesota. Recently, there is an uptick in COVID-19 claims because of the Delta surge. Dec Jan 21 Feb Mar Non-CV-19 claims Apr May Jun Jul Aug Sep -All Non-CV claims (12 months prior) Month All claims First Report of Injury database Minnesota Department of Labor and Industry -CV-19 claims MWCIA 27 27#28Percentage of COVID-19 Cases Filed with Private Insurers Versus Self-Insureds All Other Industries Corrections Fire Police Child Care Other Health Care Home Health Care Assisted Living & Residential... Nursing Homes Hospitals Comments Overall, 46% of claims with insured type listed are from the privately- insured market. 40% of claims from presumptive industries are in the privately-insured market. ■ The proportion of privately-insured cases filed vary greatly between industries. 0% 20% 40% 60% 80% 100% ■Insurer Public SI Self-insured (SI) First Report of Injury data from Minnesota Department of Labor and Industry MWCIA years 28#29Distribution of Accepted COVID-19 Claims 13,486 Health Care 82.6% 16,331 Accepted COVID-19 Claims 1,075 Corrections 6.6% 864 Emergency Response 5.3% 837 Other 5.5% 14 Child Care 0.1% Comments ■ Data from the Department of Labor and Industry shows that three- quarters of filed claims were accepted. ■ The presumption legislation impacted acceptance rates. ■ 84% of claims under a presumptive industry and/or occupation were accepted. ■ 26% of claims arising from a non-presumptive industry and/or occupation claims were accepted. First Report of Injury data from Minnesota Department of Labor and Industry MWCIA years 29#30Claim Counts Closed COVID-19 Claims Paid Losses 59.2% 0% 84.9% 10.1% 5.0% 37.5% 3.3% 20% 40% 60% 80% 100% ■Indemnity and Medical Claims Medical Only Claims MWCIA ■Indemnity Only Claims Source: MWCIA Financial Data Valued as of 12/31/2020 years Comments Interestingly, an unusual type of workers' compensation claim cropped up in the COVID-19 claim data: indemnity-only claims. ■ These are thought to reflect mild COVID-19 illnesses that did not require medical care but did require a quarantine period. ■ MWCIA's financial data shows that nearly 85% of closed claims were indemnity-only, which made up 59% of the losses paid. ■ As more complex claims close, it will be interesting to monitor how these distributions change. 30#31Thank You! Please visit www.mwcia.org MWCIA Comments ■ To learn more about COVID-19 claims in Minnesota, please see the paper on our website: ■ COVID-19 and Privately-Insured Workers' Compensation in Minnesota Please view the State of the Market Report on our website. ■ Follow MWCIA on social media to receive updates on workers' compensation news: in f years 31