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Premium Totals & Definitions

Annual premium amounts, premium level changes, and various premium definitions.;

 
Countrywide Premium
Direct Premiums Written
Year
Premium (000)
% Change
1991
 
 
1992
 
 
1993
 
 
1994
$34,889,072
 
1995
$31,674,967
-9%
1996
$30,381,002
-4%
1997
$29,087,972
-4%
1998
$29,955,982
3%
1999
$31,638,362
6%
2000
$34,612,694
9%
2001
$39,180,605
13%
2002
$44,746,865
14%
2003
$50,587,195
13%
2004
$54,379,038
7%
2005
$55,947,108
3%
2006
$55,351,284
-1%
2007
$52,739,198
-5%
2008
$46,615,393
-12%
2009
$40,855,491
-12%
2010
$39,479,528
-3%
2011
$43,274,727
10%
2012
$47,889,465
11%
2013
$51,951,219
8%
2014
$54,956,211
15%
2015
$54,956,211
6%
sources: SNL Financial Report, Aug 2015, for years 2007-2014; Best's Data Services State/Line Reports - P/C for other years
 
Indiana Premium
 
Direct Premiums Written
 
(in millions)
 
Year
Premium
% Change
 
1991
$584
  ----
 
1992
$541
-7%
 
1993
$619
14%
 
1994
$620
0%
 
1995
$606
-2%
 
1996
$539
-11%
 
1997
$490
-9%
 
1998
$511
4%
 
1999
$538
5%
 
2000
$595
11%
 
2001
$678
14%
 
2002
$700
3%
 
2003
$748
7%
 
2004
$759
1%
 
2005
$829
9%
 
2006
$823
-1%
 
2007
$791
-4%
 
2008
$712
-10%
 
2009
$621
-13%
 
2010
$617
-1%
 
2011
$693
12%
 
2012
$783
13%
 
2013
$830
6%
 
2014
$848
2%
 
2015
$890
5%
 
 
sources: SNL Financial Report, Sep 2016, for years 2007-2015; Best's Data Services State/Line Reports - P/C for other years
 
TOP 10 Indiana Carriers
2015
 
Written
Market
 
Group
Premium
Share
Others, a/k/a
 
(000)
(%)
 
1
Liberty Mutual
72,551
8.2%
Wausau, Indiana, Ohio Casualty, Safeco
2
Travelers
67,891
7.6%
 
3
Accident Fund Grp
46,483
5.2%
 
4
Zurich Fin Serv NA
45,109
5.1%
 
5
AIG
34,003
3.8%
 
6
WR Berkley Corp
33,024
3.7%
 
7
Auto-Owners
31,503
3.5%
 
8
Cincinnati
30,491
3.4%
 
9
Hartford
30,374
3.4%
 
10
AmTrust Grp
29,968
3.4%
 
Top Ten Total
421,397
47%
STATE TOTAL
889,525
100%
Source: SNL Report, August 10, 2016
File name: Q&A/IndComp_INS_MarketShare_Template_v2.xlsm
Indiana Premium & Rate Level Changes
 
 
Year
Premium Change
Rate Change
 
 
%
Factor
%
Factor
 
1
1/1/1990
23.3%
1.233
 
 
 
2
1/1/1991
4.9%
1.049
 
 
 
3
1/1/1992
13.4%
1.134
 
 
 
4
1/1/1993
7.8%
1.078
 
 
 
5
1/1/1994
2.8%
1.028
 
 
 
6
1/1/1995
-3.4%
0.966
-3.4%
0.966
 
7
1/1/1996
-5.9%
0.941
-8.6%
0.914
 
8
1/1/1997
-9.2%
0.908
-9.3%
0.907
 
7/1/1997
5.6%
1.056
5.6%
1.056
 
9
1/1/1998
-4.2%
0.958
-4.2%
0.958
 
10
1/1/1999
-2.5%
0.975
-2.5%
0.975
 
7/1/1999
2.7%
1.027
2.7%
1.027
 
1990's
subtotal
35.9%
1.359
-18.9%
0.811
 
11
1/1/2000
0.1%
1.001
0.0%
1.000
 
7/1/2000
3.6%
1.036
3.6%
1.036
 
12
1/1/2001
1.5%
1.015
1.5%
1.015
 
13
1/1/2002
-7.4%
0.926
-7.4%
0.926
 
14
1/1/2003
-1.9%
0.981
-2.2%
0.978
 
15
1/1/2004
-1.8%
0.982
-1.8%
0.982
 
16
1/1/2005
3.2%
1.032
3.2%
1.032
 
17
1/1/2006
2.2%
1.022
1.9%
1.019
 
18
1/1/2007
-3.1%
0.969
-3.1%
0.969
 
19
1/1/2008
0.4%
1.004
0.4%
1.004
 
20
1/1/2009
-3.4%
0.966
-3.4%
0.966
 
21
1/1/2010
-1.7%
0.983
-1.7%
0.983
 
22
1/1/2011
1.7%
1.017
1.7%
1.017
 
23
1/1/2012
2.6%
1.026
2.6%
1.026
 
24
1/1/2013
5.0%
1.05
5.0%
1.05
 
25
1/1/2014
-7.7%
0.923
-7.7%
0.923
 
26
1/1/2015
-3.7%
0.963
-3.7%
0.963
 
27
1/1/2016
1.9%
1.019
2.5%
1.025
 
28
1/1/2017
-9.3%
0.907
-9.3%
0.907
 
2000's
subtotal
-17.7%
0.823
-17.7%
0.823
 
28 years
TOTAL
11.9%
1.119
 
 
 

Premium Level vs. Rate Level

 

Premium level change amount can be different from the rate level change amount.

 

 

The rate level change is the change arising from an actual adjustment to the manual rates. A premium level change is the additional premium generated through a number of different ways, such as a change in the premium discount table or expense constant. Neither of these affect the manual rates, but they will affect the amount of premium paid by policyholders in a state.

 

 

Of course changing manual rates will result in both a rate level change and a premium level change.

 
 
 

Observations

 

The nineties

·         The nineties decade net change in Indiana premium level was +36%

·         The first half of the decade experienced a +62.5% increase in rates

·         The last half of the decade experienced a -13.3% drop in rates

·         Assigned risk premium dropped dramatically from $103 million in 1991 to $10 million in 1999

 

The 2000's

·         The 2000 decade experienced a net change in Indiana premium level of -9.1

·         The decade demonstrates stability with mild swings from year to year. Except for the 7.4% decrease in 2002, all changes from year to year have been less than 5% up or down.

·         Assigned risk premium was like the first hill of a roller coaster starting low in 1999 at  $10 million , peaking at $68 million in 2003, and falling back to $25 million in 2009

·         New assigned risk apps peaked in 2002, up 63% compared to 2001, a record increase

·         Since 2002, new apps have decreased an average 15% per year 2003-2009.

 

 

 
 
Indiana ranks 20th in WC direct written premium ($620 million). California has the most premium with $6.9 billion and the monopolistic fund states would have the least.
 
Of 51 jurisdictions, Indiana ranks third in number of insurance companies writing workers compensation in the state at 403. The largest state is Illinois with 413 companies.
Source: AM Best Database Services, Custom Report Project PB42-19461M; 2009 data year; produced 6/11/10


DEFINITIONS

Premium (also see Premium Algorithm Item Filing B-1351)

Source for blue text: NCCI website as of 03/30/04

Policy Year and Calendar Year Premium
  • Policy year premiumA policy year is composed of premiums and losses for all policies with effective dates in that year. For example, for policies with effective dates from January 1 to December 31, 2006, all claims that develop for these policies must be reported under Policy Year 2006, regardless of the year the injury occurred or the year it was reported to the carrier.

    Policy year premium can change from valuation to valuation, as premium audits are performed or retrospective premium adjustments are made.
  • Calendar year premium
    Associated with premium “booked” during the given calendar year period, regardless of the policy effective date. Calendar year premium is final at the end of the period, and generally does not change from valuation to valuation.


    The title "Calendar-Accident Year" reflects the way the financial data is organized. The term “calendar” pertains to the premium, which is organized by transaction date. The term “accident” pertains to the losses (and associated claim counts and claim expenses), which are organized by the date the injury occurred. For example, Calendar-Accident Year 2012 includes premium transactions occurring in 2012, along with claims with accident dates occurring in 2012.

  • Written and Earned Premium
  • Written premium—Generally, the estimated premium processed by the company system at the time the policy is issued.
  • Earned premium—The proportional share of the written premium (including any charges added to the premium) applicable to the expired part of the policy. Unless stated otherwise, premium collected by NCCI Financial Calls is Earned Premium.

  • Net Premium, Standard Premium at Company Level, and Standard Premium at NCCI Designated Statistical Reporting (DSR) Level
  • Net premium—The actual premium on the carrier’s books, and as reported on the carrier’s statutory financial reports (e.g., annual statement). It is before the application of any dividends, but otherwise it is after all adjustments.
  • Standard Premium at Company Level—Generally, the full company premium (including coverage for expenses) but prior to the application of discounts, retrospective adjustments, and certain other adjustments.
  • Standard Premium at DSR Level—Premium prior to the application of company-specific rate deviations or loss cost expense multipliers.

  • The precise components of each premium type are summarized in the following table:

    Component
    Manual
    DSR
    Company
    Standard
    Net
    Excluded
    Published rates or loss cost

    x

    x

    x

    x

     
    NCCI experience rating modification
     

    x

    x

    x


     

    NCCI expense constant (zero in loss cost states)


     

    x

    x

    x


     

    NCCI loss constant (zero in loss cost states)


     

    x

    x

    x


     

    Managed care credits


     

    x

    x

    x


     

    Drug-free workplace credits


     

    x

    x

    x


     

    Workplace safety program credits


     

    x

    x

    x


     

    Contracting Classification Premium Adjustment Program


     

    x

    x

    x


     

    Merit Rating Plan adjustment


     

    x

    x

    x


     

    Deviation from NCCI rates


     

     

    x

    x


     

    Company loss cost expense multiplier
     


     

    x

    x


     

    Deviations from NCCI published experience rating modification factors
     


     

     

    x


     

    Retrospective Rating Plan adjustments


     


     


     

    x


     

    Schedule rating adjustments


     


     


     

    x


     

    Premium discounts


     


     


     

    x


     

    Premium credits for small deductible coverage


     


     


     

    x


     

    Loss Sensitive Rating Plan (LSRP) adjustments


     


     


     

    x


     

    Payment of policyholder dividends


     


     


     

     

    x



    Direct Written Premium
    1) The policy premium adjusted by additional or return premiums but excluding any reinsurance premiums
     
    2) In financial statements, the gross premium income adjusted for additional or return premiums but excluding any additions for reinsurance assumed and any deductions for reinsurance ceded.
     

    “Workers’ Compensation” premium is reported on Line 16 in Column 1 (Direct Premiums Written) of the Exhibit of Premiums and Losses (Statutory Page 14 Data) of a company's NAIC Annual Statement. Note that the definition includes Federal laws and employer’s liability, but Line 16 excludes excess WC.

    Source: NAIC 2009 P/C Annual Statement Instructions, issued 8/1/09; Appendix p. 472

    “Excess Workers’ Compensation” is reported on Line 17.3. See the State Page section of the manual, p. 168.

     

    Direct Premiums Written as defined by the NAIC includes “Gross premiums, including policy and membership fees, less return premiums and premiums on policies not taken.”

    Source: NAIC 2009 Property/Casualty Quarterly Statement Instructions dated 11/1/08, Schedule T – Exhibit of Premiums Written

    This same amount is also reported in the NCCI Annual Call for Experience #1. By definition in the NCCI call, you use the “Direct Premiums Written” amount reported to the NAIC. “Direct written premium” is already the benchmark amount used for other premium based assessments. It is used by:

    • the ICRB to assess members for our operations
    • the ICRB for Indiana assigned risk pool participation ratios of pool members
    • the Indiana WC Board for the Second Injury Fund assessment
    • NCCI for its affiliates (members) pricing for services

    Earned Premium

    The portion of a policy premium allocable to the expired portion of the policy term. Earned premium shows the amount of premium that corresponds to the exposure covered over the life of the policy.


    Written Premium
    The premium charged by an insurance company for the period of time and coverage provided by an insurance contract. Written premium depicts the amount of money placed on the books for the entire policy while earned premium shows the amount of premium that corresponds to the exposure covered over the life of the policy.

    Excess Premium
    Premium amounts charged for excess workers compensation policies, which are written exclusively to cover losses in excess of a specified amount. Rarely do insurance companies take the full risk. They pass a portion of that risk to reinsurance companies that specialize in that market. Self insurers do not assume the full risk, either. Reinsurance is available that limits risk.


    Premium Level Changes by State

    The updating of rates in a state causes the level of premium to change. Premium is not simply a function of rates. Since workers compensation premium is based on payroll, then changes in payroll in a state from year to year can also affect the total premium in a state. However, the premium level changes shown in the above table and shown in the NCCI Annual Statistical Bulletin, Exhibit II, only show the premium level change from standard earned premium, which contemplates manual rates and experience rating. It does not contemplate premium discounts, retrospective rating plans, and schedule rating plans which are typically included in net premiums.


    Manual Premium
    Generally payroll divided by 100 multiplied by the coverage provider's rate. For per capita classes (0908, 0909, 0912, and 0913), it is the number of persons multiplied by 10. For aircraft seat surcharge classes (0088 and 9108), it is the number of seats multiplied by 10. Statistical codes are not included in manual premium.


    Net Premium
    The final premium that an insured pays. The standard premium after the application of premium debits and credits. (Please note that retrospective rating adjustments are not included in the premium adjustments.)

    Standard Premium
    The manual premium at the coverage provider's rate multiplied by the experience modification factor. The standard premium is usually not the final premium that the insured pays. It excludes the effects of some pricing programs, such as premium discounts, retrospective rating, and expense constants that are reported in statistical classes.

    The Basic Manual Rule 3.A.20
    "Standard Premium is the premium before the application of the premium discount. It is the state premium determined on the basis of:
      • Authorized rates
      • Disease loadings
      • Nonratable elements
      • Aircraft seat surcharges
      • Premium for increased limits of liability
      • Experience rating modification
      • Applicable schedule rating modification
      • Minimum premiums
    Total Standard Premium is the total premium for all states covered by the policy excluding expense constant and any disease charge subject to the Federal Coal Mine Health and Safety Act before the application of the premium discount.

    Note: The Annual Financial Calls for experience, which are used for ratemaking , contain a different definition of standard premium."
     

    Statistical Plan - 2008 Edition, Rule 3-P Total Standard Premium:

    "Report the total premium charged for the policy, excluding the approved expense constant, premium discount, and any special payments to the states that are assessed on total premium writings or total losses incurred."

    The Basic Manual definition is contained within the Premium Discount rule and is used to determine the premium subject to premium discount. The Statistical Plan Manual instructs what premium to report (for ratemaking purposes).

     

    The Basic Manual Indiana Assigned Risk Special Rules (green pages), LSRP Section, Rule 4.C.f., Page AR32, defines standard premium as "the premium for the risk determined on the basis of authorized rates, any experience rating modification, ARAP, assigned risk surcharge programs other than LSRP, and minimum premiums."


    Experience

    Calendar Year Experience
    Experience of earned premium and incurred loss transactions actually occurring within the calendar year beginning January 1, irrespective of the contractual dates of the policies to which the transactions relate and the dates of the accidents.

    Policy Year Experience
    Premium and loss data on business for a twelve-month period for policies with inception dates within the twelve-month period. The policies within a policy period effective from January 1 through December 31 of a given year. For example, suppose that a state has policy periods of 7/1/2005 to 6/30/2006, 7/1/2004 to 6/30/2005, 7/1/2003 to 6/30/2004, 7/1/2002 to 6/30/2003, and 7/1/2001 to 6/30/2002.

    Then the 2006 policy year data for that state would contain the experience for policies with effective dates 1/1/2006 to 6/30/2006, the last day of the latest policy period. The years 2005, 2004, 2003 and 1992 would contain experience for policies with effective dates from January 1 to December 31 of the corresponding years. The 2001 policy year would contain experience for policies with effective dates from the beginning of the oldest policy period, 7/1/2001 to 12/31/2001.

    Related Files

    The material in this document has been prepared and shared for informational purposes only and should not be relied upon as legal advice on any particular situation.