Mega-Trends Influencing the Workers Compensation

Insurance Industry10th Annual National Workers’ Compensation

Insurance ExecuSummitUncasville CT, February 5, 2013

Steven N. Weisbart, Ph.D., CLU, Senior Vice President & Chief EconomistInsurance Information Institute 110 William Street New York, NY 10038Office: 212.346.5540 Cell: (917) 494-5945 stevenw@iii.org www.iii.org

2

Presentation Outline: 6 Mega-Trends

1. A Growing Exposure Base, but with a Different Mix of Risks

2. Workplace Safety Improvement Continues, but “Room” for More

3. Inflation, WC-style

4. Low Investment Returns

5. The Aging Workforce

6. The Obesity Epidemic

WC Profitability

33

4

Workers CompReturn on Net Worth, 2002-2011

2.4%

6.9%

10.1%9.6%

10.0%

9.0%

5.1%4.2% 3.9%

6.2%

0%

3%

6%

9%

12%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Sources: NAIC; Insurance Information Institute

Profits down during and after a severe

recession: cause and effect?

5

Workers CompReturn on Net Worth, 2011

37

.4%

27

.9%

23

.5%

18

.4%

14

.0%

13

.2%

13

.1%

12

.3%

11

.0%

9.9

%

8.9

%

8.7

%

8.4

%

8.2

%

7.9

%

7.5

%

7.5

%

7.4

%

7.4

%

7.3

%

7.3

%

7.1

%

7.1

%

6.6

%

6.4

%

6.2

%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

ND

WY

OH

WA

NV

AR

WV

FL

TX

NH HI

MA

VA

AK

MT IN KY

CA

MO

NE

SD MI

PA AZ

AL

US

Sources: NAIC; Insurance Information Institute

Top 25 States

Nine states posted double-digit profits in WC in 2011

6

Workers CompReturn on Net Worth, 2011

6.2%

6.3%

6.1%

6.0%

5.6%

5.5%

5.0%

4.9%

4.5%

4.3%

4.0%

3.9%

3.8%

3.5%

3.1%

3.1%

2.8%

2.7%

2.6%

2.6%

2.5%

1.8%

1.1%

0.8%

-0.7

%

-4.7

%

-20%

-10%

0%

10%

20%

30%

40%

50%

US

UT

GA

MN

TN

OR

ME

MS RI

NM CT NJ

NC IL

MD

NY

SC WI

IA VT LA

KS

CO

OK ID DE

Bottom 25 States

In 2011, in 15 states the Return on Net

Worth was under 4%

Sources: NAIC; Insurance Information Institute

Workers Compensation Combined Ratio: 1994–2012F

102.

0

97.0

100.

0

101.

0

112.

6

108.

6

105.

1

102.

7

98.5

103.

6

104.

6 110.

4

116.

6

117.

1

116.

0121.

7

107.

0

115.

3

118.

2

90

95

100

105

110

115

120

125

130

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12F

Workers Comp underwriting resultsare the worst they have been in a decade.

Sources: A.M. Best; Insurance Information Institute. 7

1. A Growing Exposure Base,but with a Different Mix of Risks

8

Health Care, Education, Services Will Lead

-17

-26

11

1

17

0

10

2

94 10

3 12

9

11

3

18

8

15

4

11

4

80

24

3

22

3

30

3

18

3

17

7 20

6

12

9

25

6

17

4 19

7

24

9

32

3

26

5

20

8

12

0

15

2

78

17

7

13

1

11

8

21

7

25

6

20

2

16

6

(50)

0

50

100

150

200

250

300

350

Jan-

10

Feb

-10

Mar

-10

Apr

-10

May

-10

Jun-

10

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

Nov

-11

Dec

-11

Jan-

12

Feb

-12

Mar

-12

Apr

-12

May

-12

Jun-

12

Jul-1

2

Aug

-12

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Jan-

13

Monthly Change in Private Employment, 2010 - 2013

Thousands

Since January 2010, private employers added 6.06 million (net) jobs. This partly offsets losses of 3.78 million jobs in 2008and 4.98 million in 2009.

Seasonally adjusted. Dec 2012 and Jan 2013 are preliminary dataSources: US Bureau of Labor Statistics; Insurance Information Institute

The private sector created 675,000 jobs

in 2012:Q4

9

Average Monthly Gain: 164,000 jobs

-0.0

17

-0.0

43

0.06

8

0.23

8

0.34

0

0.43

4

0.53

7

0.66

6

0.77

9

0.96

7

1.12

1

1.23

5

1.31

5

1.55

8

1.78

1

2.08

4

2.26

7

2.44

4

2.65

0

2.77

9

3.03

5

3.20

9

3.40

6

3.65

5

3.97

8

4.24

3

4.45

1

4.57

1

4.72

3

4.80

1

4.97

8

5.10

9

5.22

7

5.44

4

5.70

0

5.90

2

6.06

8

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jan-

10

Feb

-10

Mar

-10

Apr

-10

May

-10

Jun-

10

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

Nov

-11

Dec

-11

Jan-

12

Feb

-12

Mar

-12

Apr

-12

May

-12

Jun-

12

Jul-1

2

Aug

-12

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Jan-

13

Mill

ion

sCumulative Change in Private Sector Employment: Jan. 2010 – Jan. 2013

Source: US Bureau of Labor Statistics: http://www.bls.gov/ces/home.htm; Insurance Information Institute. 10

Private employers added 6.06 million (net) jobs since Jan. 2010, after having shed 4.66 million jobs in 2009 and 3.81 million in 2008 (state and local governments have shed hundreds of thousands of jobs).

Job gains and pay increases have added more than $600

billion to payrolls since Jan. 2010

11

Nonfarm Payroll (Wages and Salaries):Quarterly, 2005–2012:Q3

Note: Recession indicated by gray shaded column. Data are seasonally adjusted annual rates.Sources: http://research.stlouisfed.org/fred2/series/WASCUR; National Bureau of Economic Research (recession dates); Insurance Information Institute.

Billions

$5,500

$5,750

$6,000

$6,250

$6,500

$6,750

$7,00005

:Q1

05:Q

2

05:Q

3

05:Q

4

06:Q

1

06:Q

2

06:Q

3

06:Q

4

07:Q

1

07:Q

2

07:Q

3

07:Q

4

08:Q

1

08:Q

2

08:Q

3

08:Q

4

09:Q

1

09:Q

2

09:Q

3

09:Q

4

10:Q

1

10:Q

2

10:Q

3

10:Q

4

11:Q

1

11:Q

2

11:Q

3

11:Q

4

12:Q

1

12:Q

2

12:Q

3

Prior Peak was 2008:Q1 at $6.60 trillion

Latest (2012:Q3) was $6.88 trillion, a new peak--$663B

above 2009 trough

Recent trough (2009:Q3) was $6.25 trillion, down

5.3% from prior peak

Growth rates in 2012Q1:12 over Q4:11: 1.8%Q2 over Q1: 1.4%

Q3 over Q2: 0.3%

Pace of payroll growth is slowing

in 2012

11

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12*

$25

$30

$35

$40

$45

$50Wage & Salary DisbursementsWC NPW

12

Payroll Base* WC NWP

Payroll vs. Workers Comp Net Written Premiums, 1990-2012E

*Private employment; Shaded areas indicate recessions. Payroll and WC premiums for 2012 is I.I.I. estimate based YTD 2012 actuals.Sources: NBER (recessions); Federal Reserve Bank of St. Louis at http://research.stlouisfed.org/fred2/series/WASCUR ; NCCI; I.I.I.

Continued Payroll Growth and Rate Increases Suggest WC NWP Will Grow Again in 2012; +7.9% Growth in 2011 Was the First Gain Since 2005

7/90-3/91 3/01-11/0112/07-6/09

$Billions $Billions

WC premium volume dropped two years before

the recession began

WC net premiums written were down $14B or 29.3% to

$33.8B in 2010 after peaking at $47.8B

in 2005

+9% in 2012E

13

U.S. Employment in Service Industries, Private Sector, Monthly, 1990–2012*

*As of December 2012; Seasonally adjusted; Nov 2012 and Dec 2012 are preliminaryNote: Recessions indicated by gray shaded columns.Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes.

Millions

65

70

75

80

85

90

95

'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Recent low point (Oct 2009) was 89.1 million,

down 4.9% from start of recession (Dec 2007)

Latest (Dec 2012) was

93.707 million, a new peak

Previous peak was 93.697 million

(Jan 2008)

14

U.S. Employment in Health Care & Social Services, Monthly, 1990–2012*

*As of Dec 2012 (Nov 2012 and Dec 2012 are preliminary); Seasonally adjustedNote: Recessions indicated by gray shaded columns.Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes.

Millions

9

10

11

12

13

14

15

16

17

18

'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Employment in the health care and social service sectors grew in virtually every month for the

last 22 years, unaffected by recessions…

Cumulative growthover 23 years: 89.5%

…and this growth is

expected to continue

indefinitely

15

U.S. Employment in ManufacturingMonthly, 1990–2012*

*As of December 2012 (Nov 2012 and Dec 2012 are preliminary); Seasonally adjustedNote: Recessions indicated by gray shaded columns.Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes.

Millions

9

10

11

12

13

14

15

16

17

18

'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Recent low point (Jan. 2010) was 11.46 million,

down 16.6% from start of recession (Dec 2007)

Latest was 11.988 million, up 4.6% from low point (Jan 2010)

16

U.S. Employment in ConstructionMonthly, 1990–2012*

*As of December 2012 (Nov 2012 and Dec 2012 are preliminary); Seasonally adjustedNote: Recessions indicated by gray shaded columns.Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes.

Millions

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

It often takes a long time after a recession for

construction employment to surpass its pre-recession level

Peak was 7.72 million in Aug 2006

Latest (Dec 2012) was 5.56 million

17

Employment Changes in Construction,2012 vs. 2011* and 2011 vs. 2010*: Selected States

10.6

10.4

9.3

5.4

5.1

4.4

4.1

4.1

3.8

3.5

-2.7

-3.2

-4.1

-5.9

-5.9

-6.1

-6.2

-6.6

-8.8

-11.

5

37.4

26.1

-0.8

-16.

1

2.9

-5.5

1.1

-1.2

-4.7 -0

.7

-1.6 -0.7

-3.9 -0

.8

5.1

-0.1

-0.3

-1.5

3.8

1.5

-20

-10

0

10

20

30

40

50

TX CA IN NY

TN OH MI

OK

ND

OR

NC

SC

MO

NM FL KY

CO AL WI

GA

2011 vs 2010 2012 vs 2011

*Novembers of years indicated; seasonally adjusted

Source: U.S. Bureau of Labor Statistics, Regional and State Employment and Unemployment—November 2011, releasedDecember 20, 2011 and Regional and State Employment and Unemployment—November 2012, released December 21, 2012.

Some states, like CO, lost construction

jobs in 2011 but gained them in

2012

Some states, like TX and CA, gained

construction jobs in both years

Thousands

Some states, like NY and MI, gained

construction jobs in 2011 but lost more

in 2012Some states, like FL and

GA, lost construction jobs in both

years

2. Workplace Safety Improvement Continues, but “Room” for More

18

The WC industry has certainly helped create/support the

improvement

19

Fewer Occupational Deaths1992–2011p

6,05

5

6,05

4

5,92

0

5,91

5

5,53

4

5,57

5

5,76

4

5,73

4

5,84

0

5,65

7

5,21

4

4,55

1

4,69

0

4,60

9

6,23

8

6,20

2

6,27

56,63

2

6,33

1

6,21

7

4,000

5,000

6,000

7,000

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11p

P = preliminary; final data will be released in Spring 2013 Source: U.S. Bureau of Labor Statistics, National Census of Fatal Occupational Injuries in 2011 (Preliminary Results), released September 20, 2012.

The death rate per 100,000 full-time-equivalent workers was 3.5 in 2011,down from 3.6 in 2010 (but 3.5 in 2009).

Includes multiple deaths in Upper Big Branch coal mine and Deepwater

Horizon oil rig

Number of Fatal Injuries

20

Number of Workplace Homicides, 1992-2011

10

44

10

74

10

80

10

36

92

7

86

0

71

4

65

1

67

7

64

3

60

9

63

2

55

9

56

7

54

0

62

8

52

6

54

2

50

6

45

6

400

500

600

700

800

900

1000

1100

12001

99

2

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Sources: BLS; Insurance Information Institute

405 of the 506 homicides (80%) in 2010 were by

shooting

21

22

Private Industry: Fewer Injuries & Illnesses with Days Away from Work

723,

680

710,

170

684,

390

407,

610

408,

400

394,

090

380,

440

349,

450

311,

890

241,

310

223,

020

223,

920

766,

250

809,

420

803,

060

840,

580

850,

930

908,

310

0

200,000

400,000

600,000

800,000

1,000,000

2003 2004 2005 2006 2007 2008 2009 2010 2011

service-producing goods-producing

Source: U.S. Bureau of Labor Statistics, National Occupational Injuries and Illnesses Requiring Days Away from Work, 2011, Table 1, released November 8, 2012.

The number of illnesses and injuries dropped from 2003 to 2007 despite growth in employment and the aging of the workforce.

The drop continued through the Great Recession and into the recovery.

Goods-producing, 2011 vs. 2003: down 45.1%

Service-producing, 2011 vs. 2003: down 24.7%

Number

23

The Low CPI Doesn’t Reflect WC Cost Pressures

3. Inflation and Claim Severity

4.7%4.0%

4.4% 4.2% 4.0%4.4%

3.7%3.2% 3.4%

3.0%3.5%

8.8%

7.7%

5.4%

9.1%

6.1% 6.1% 6.1%5.4%

2.0%

4.1%

-2%

0%

2%

4%

6%

8%

10%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E

Change in Medical CPIChange Med Cost per Lost Time ClaimChange in Overall CPI

WC Medical Severity Typically RisesFaster Than the Medical CPI Rate

Sources: CPI and Med CPI from US Bureau of Labor Statistics, WC med severity from NCCI based on NCCI states.

The average annual growth in WC medical severity from 2002 through 2009 was over 6% vs. the medical CPI (about 4%), which

itself was higher than the overall CPI

2.3% 2.7%

4.0%5.0% 4.9%

3.5%

2.0% 2.0%2.9% 3.1%

3.6% 3.9%

1.2%

5.9%

7.7%

9.0%

10.1%

4.6%3.6%

5.5%6.5%

8.8%

2.0%

1.1%2.4%2.0%

2.6%

0.6%

-2.8%

1.0%1.7%

10.1%

9.2%

3.1%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

p

Change in Median Usual Weekly EarningsChange in Indemnity Cost per Lost-Time Claim

WC Indemnity Severity Generally Grows Faster than Wages, 1995-2011p

2011p: Preliminary based on data valued as of 12/31/2011; 1991-2009: Based on data through 12/31/2010, developed to ultimate. Based on the states where NCCI provides ratemaking services. Excludes the effects of deductible policies.Sources: NCCI, BLS, from Current Population Survey

4. Low Investment Returns

28

29

U.S. 10-Year Treasury Note Yields:A Long Downward Trend, 1990–2012*

*Monthly, through Dec. 2012. Note: Recessions indicated by gray shaded columns.Sources: Federal Reserve Bank at http://www.federalreserve.gov/releases/h15/data.htm. National Bureau of Economic Research (recession dates); Insurance Information Institute.

1%

2%

3%

4%

5%

6%

7%

8%

9%

'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Yields on 10-Year U.S. Treasury Notes have been essentially below 5% for over a decade.

Since roughly 80% of P/C bond/cash investments are in 10-year or shorter durations, most P/C insurer portfolios will have low-yielding bonds for years to come.

Yields on 10-Year U.S. Treasury Notes recently

plunged to all time record lows

29

30

Long-Term Reduction in the Level of Investment Earnings: Outlook

Source: Insurance Information Institute.

Fed actions in capital markets will likely keep interest rates low for at least several years

In a prolonged period of low interest rates, each year maturing higher-rate bonds are replaced with lower rates, building in a low portfolio yield that will last for the duration of the newer bonds

Industry must be prepared to operate in an environment in which investment returns are a much smaller fraction of profits

Drives rates higher? Regulators will not accept thisStiffens underwriting discipline? Yet to manifest itself

5. The Aging Workforce

31

Number of Workers Age 65-69, 70-74,and 75+, Quarterly, 1998-2012

2327

2312 2404

2406

2393 2530

2498 2559 2627

25702632

2627

2562 2674 2859

2896

2723 2842

28723127

2951 3079

3047 3218

3201 3330

3344

3351

33643396

3334 342634803505

35063547 3764

3775

3626 3833 4074

4138

41054213

1027

1022

10261069

1037 1129

1094

1090

1115

1139

11421181

1215

1160

1182

1177

1135

1162

1138

1141

1177

1182

1183

1213

11931244

1250

1314 1375

126213141356

1385

1397

1385

1367

1370 1452

1442

1407

1389 1530

1524

14301495 15801633

15051550

1498 1598

1564

1584 16821726

171917791835

1842

624

636

641686

668718773

758

789

780

775

801

779

792

762815

790

774

802

765 863926

811 919

928

947

969

1039

9741055

1018 1076

1057

1085

1085

1072 1171

1152

1133

11511210

1224

1258

1256

11431190

1206

1198

1166 1279

1243

1185 1267

1280

1302

1311

1301

12841381

2473

20432067

20432083

20192051

2014 2106 22182251

22422283

223422652304

1250

986

500

1000

1500

2000

2500

3000

3500

4000

4500

1998.1

1998.3

1999.1

1999.3

2000.1

2000.3

2001.1

2001.3

2002.1

2002.3

2003.1

2003.3

2004.1

2004.3

2005.1

2005.3

2006.1

2006.3

2007.1

2007.3

2008.1

2008.3

2009.1

2009.3

2010.1

2010.3

2011.1

2011.3

2012.1

2012.3

Age 65-69 Age 70-74 Age 75 & over

Source: US Bureau of Labor Statistics, US Department of Labor; Insurance Information Institute.

There are now over 7.4 million senior workers. This is double the number in 1998. Over the next decade it will

probably double again.

(Thousands)

This is the leading edge of the older half of the

“baby boom” generation

Labor Force Participation Rate, Ages 65-69, Quarterly, 1998:Q1-2012:Q4

25.2%

25.2%26.3%

26.5%

26.2%

27.9%

27.2%

27.4%27.9%

27.3%27.8%

27.6%

26.8% 27.6%

29.3%

29.5%

27.9% 28.5%

28.7%

30.8%

29.3% 30.1%

29.1%30.3%

30.1% 30.9%

31.0%

30.7%

31.0%

31.4%

30.9%

31.2%

31.6%

31.3%

31.5%

31.4%32.8%

32.3%

31.1%32.2%

32.2%

32.5%

31.8%

31.8%

27.0%

22.9%

23.0%

22.8%

23.0%

22.3%

22.5%

22.1%

23.5% 24.4%

24.4%

24.3% 24.9%

24.4%

24.4%

24.8%

20%

22%

24%

26%

28%

30%

32%

34%

1998.1

1998.3

1999.1

1999.3

2000.1

2000.3

2001.1

2001.3

2002.1

2002.3

2003.1

2003.3

2004.1

2004.3

2005.1

2005.3

2006.1

2006.3

2007.1

2007.3

2008.1

2008.3

2009.1

2009.3

2010.1

2010.3

2011.1

2011.3

2012.1

2012.3

Not seasonally adjusted. Sources: US Bureau of Labor Statistics, US Department of Labor; Insurance Information Institute.

The brown bars indicate recessions.

Labor Force participation rate

The switch from DB pension plans (with early-retirement incentives) to DC plans (with, in effect, later-retirement incentives) might be partly responsible for raising this rate.

1 in 3 in this age group are working. Virtually

none of them are “baby boomers”

Labor Force Participation Rate,Ages 70-74, Quarterly, 1998:Q1-2012:Q4

14.2%

13.8%14.2%

14.0%

14.0%14.4%

14.4% 14.9%

14.9% 15.4%

15.6%

15.3%16.4% 17.0%

15.8%16.2% 16.7%

16.9%

17.2%

17.0%

16.7%

16.8%18.0%

17.5%

17.3%

16.9%

18.6%

18.2%

17.7%

17.9%18.9%

19.2%

18.0%

18.1%

17.4%18.4%

18.0%18.4% 19.3%19.5%

19.2%

19.1% 19.9%

19.6%

14.6%

13.1%13.6%

12.4%12.9%

12.4%

12.2%

12.5% 13.1%

13.3%

13.5%

13.6%

13.8% 14.4%

13.7% 14.2%

9%

12%

15%

18%

21%

1998

.1

1998

.3

1999

.1

1999

.3

2000

.1

2000

.3

2001

.1

2001

.3

2002

.1

2002

.3

2003

.1

2003

.3

2004

.1

2004

.3

2005

.1

2005

.3

2006

.1

2006

.3

2007

.1

2007

.3

2008

.1

2008

.3

2009

.1

2009

.3

2010

.1

2010

.3

2011

.1

2011

.3

2012

.1

2012

.3

Source: US Bureau of Labor Statistics, US Department of Labor; Insurance Information Institute.

Labor Force participation rate

The labor force participation rate for workers 70-74 grew by about 50% since 1998.Growth stalled during and after the Great Recession but has since resumed.

Nearly 1 in 5 in this age group is working.

15 years ago it was 1 in 8.

Labor Force Participation Rate,Ages 70-74, Quarterly, 1998:Q1-2012:Q4

18.3%

17.5%18.3%

17.7%

16.9% 18.5%18.9%

19.3%

19.6%

19.1%

19.1%

19.6% 21.2%21.7%

20.0%

19.8% 21.1%

21.6%22.4%

21.4%

20.3%

20.2%22.2%

22.1%

21.3%

20.7%22.8%

23.0%

21.9%

22.1%

22.6% 23.6%

22.3%

22.6%

21.1% 22.2%

22.1% 23.5% 24.5%

25.1%

23.5%

23.8%24.7%

24.6%

9.3%8.9%9.0%

10.0%9.7%9.9%9.3%9.7%9.9%9.5%

10.2%10.5%11.0%10.5%11.2%10.9%10.8%10.9%11.1%

11.7%11.1%10.8%

11.4%11.3%11.0%

12.4%12.8%11.9%12.6%13.0%12.3%

13.3%13.1%13.0%13.0%13.4%13.6%

13.9%14.5%13.8%13.9%13.8%

15.1%14.3%14.2%14.5%

15.8%15.5%

14.5%14.3%14.4%15.3%14.6%14.2%14.8%14.7%

15.5%15.2%15.7%15.4%

18.5%

17.8%

18.4%

16.0%

16.6%

16.6%

16.3%

16.5% 17.5%

17.7%

18.3%

17.9%

18.1%

18.6%

17.7%

18.0%

8%

12%

16%

20%

24%

28%

1998

.1

1998

.3

1999

.1

1999

.3

2000

.1

2000

.3

2001

.1

2001

.3

2002

.1

2002

.3

2003

.1

2003

.3

2004

.1

2004

.3

2005

.1

2005

.3

2006

.1

2006

.3

2007

.1

2007

.3

2008

.1

2008

.3

2009

.1

2009

.3

2010

.1

2010

.3

2011

.1

2011

.3

2012

.1

2012

.3

men women

Source: US Bureau of Labor Statistics, US Department of Labor; Insurance Information Institute.

Labor Force participation rate

The labor force participation rate for men 70-74 grew by about 50% since 1998,but for women 70-74 it nearly doubled (from about 9% to about 15.5%).

Labor Force Participation Rate, Quarterly Ages 75 and over, 1998-2012:Q4

5.4%

5.1%5.1% 5.2%

5.0%

5.5%5.9%

5.8% 5.9% 6.0% 6.1%6.5%

6.1%

6.6%

6.3%6.7%

6.4% 6.6%

6.0%

6.5%6.5%

7.1%

7.0%

6.9%6.9%7.2% 7.4% 7.6%7.6%

7.0% 7.2%7.3%7.3%

6.9%

7.7%

7.5%

7.1%7.5% 7.6% 7.7%

7.6%7.6%

7.4%7.8%

5.8%

5.4%

5.1%

4.8%5.0%

4.6%4.6%

4.5%

5.2% 5.4%

5.3%

5.2% 5.3%

5.2%5.2%

5.1%

3%

5%

7%

9%

1998.1

1998.2

1998.3

1998.4

1999.1

1999.2

1999.3

1999.4

2000.1

2000.2

2000.3

2000.4

2001.1

2001.2

2001.3

2001.4

2002.1

2002.2

2002.3

2002.4

2003.1

2003.2

2003.3

2003.4

2004.1

2004.2

2004.3

2004.4

2005.1

2005.2

2005.3

2005.4

2006.1

2006.2

2006.3

2006.4

2007.1

2007.2

2007.3

2007.4

2008.1

2008.2

2008.3

2008.4

2009.1

2009.2

2009.3

2009.4

2010.1

2010.2

2010.3

2010.4

2011.1

2011.2

2011.3

2011.4

2012.1

2012.2

2012.3

2012.4

Sources: US Bureau of Labor Statistics, US Department of Labor; Insurance Information Institute.

In the last 14 years, the labor force participation rate for workers 75 and over grew from 4.5% to 7.8%. So 92.2% of these people are retired.

Labor Force participation rate The labor force participation

rate for workers 75 and over will probably hit 10% soon. This is close to what the rate was for the 70-74 group a decade ago.

Labor Force Participation Rate, Quarterly Ages 75 and over, 1998-2012:Q4

8.3%

8.0%

7.6% 7.8%

7.2%8.0% 8.4%

8.6%

8.5% 8.6% 9.1% 9.9%

8.8% 9.4%

9.6%9.7%

9.3% 9.9%

9.0%9.7%

9.2%

10.5%

10.3%

9.8%

9.7% 10.3% 10.8%

10.7%

10.1%

9.3%

11.1%

10.8%

10.1%

9.8%10.9%

10.8%

10.1%

10.3%

10.5%

10.8%11.3%

11.1%

10.9%12.1%

2.9%2.9%2.8%3.0%3.1%3.3%

3.4%3.3%3.4%3.8%3.5%3.6%

3.2%3.3%3.3%3.5%3.4%3.5%3.6%3.5%

4.0%4.3%4.1%4.1%4.3%4.3%4.1%

4.4%4.3%4.7%4.2%4.7%4.5%4.4%

4.1%4.5%4.7%

4.8%4.8%5.0%5.1%5.2%5.1%

5.6%6.0%

5.4%

4.7%5.0%5.4%5.0%

5.6%5.4%5.0%5.5%5.5%5.5%

5.1%5.3%4.9%4.9%

7.9%8.3%

8.4%

8.2%

7.9%

7.7%8.5%

8.3%

6.9% 7.3%

7.5% 8.1%

7.4% 7.8% 8.6%

8.4%

2%

4%

6%

8%

10%

12%

14%

1998.1

1998.2

1998.3

1998.4

1999.1

1999.2

1999.3

1999.4

2000.1

2000.2

2000.3

2000.4

2001.1

2001.2

2001.3

2001.4

2002.1

2002.2

2002.3

2002.4

2003.1

2003.2

2003.3

2003.4

2004.1

2004.2

2004.3

2004.4

2005.1

2005.2

2005.3

2005.4

2006.1

2006.2

2006.3

2006.4

2007.1

2007.2

2007.3

2007.4

2008.1

2008.2

2008.3

2008.4

2009.1

2009.2

2009.3

2009.4

2010.1

2010.2

2010.3

2010.4

2011.1

2011.2

2011.3

2011.4

2012.1

2012.2

2012.3

2012.4

men women

Sources: US Bureau of Labor Statistics, US Department of Labor; Insurance Information Institute.

In the last 15 years, the labor force participation rate for men 75 and overgrew from 6.9% to 12.1% and for women doubled (from 2.9% to about 5.5%).

Labor Force participation rate

38

Fatal Work Injury Rates Improved SlightlySince 2006 but Still Climb Sharply With Age

2.8

2.7 3.

3 3.7 4.

2

5.0

11.2

2.6 3.

0 3.1 3.4 4.

1 4.6

10.2

2.4 2.6 2.7 3.

2 3.7

4.5

12.2

2.5

2.4

2.4 3.

0 3.6 4.

3

12.1

2.8

2.2 2.

7 2.9 3.

6

4.7

11.9

0

2

4

6

8

10

12

14

18-19 20-24 25-34 35-44 45-54 55-64 65+

20062007200820092010

Source: US Bureau of Labor Statistics, at http://www.bls.gov/iif/oshcfoi1.htm/#2010

The fatality rate for workers 65 and older was 5 times that of workers age 25-34. The workplace of the future will have to

be completely redesigned to accommodate the surge in older workers.

Fatal Work Injury Rate per 100,000 full-time-equivalent workers No improvement in

fatal work injury rate for this age group

39

Older Workers Lose More Daysfrom Work Due to Injury or Illness

56

910

12

15

56

9

1112

13

56

8

10

13

15

56

9

12

14 14

0

2

4

6

8

10

12

14

16

20-24 25-34 35-44 45-54 55-64 65+

2008200920102011

Source: US Bureau of Labor Statistics, Nonfatal Occupational Injuries and Illnesses Requiring Days Away From Work, 2011 (Table 10), released November 8, 2012.

Median Days Away From Work

Youngest baby boomer is age 49 (in 2013)

Median lost time of workers age 65+ is 2-3X that of workers age 25-34. These numbers are pretty stable—they haven’t changed much since 2008.

Oldest baby boomer is age 67 (in 2013)

40

Percent of Days-Away-from-Work Cases, by Days Lost and Age Group, 2011

13.7

12.5

11.0

9.5

8.6

7.2

21.8

20.2

17.0

16.2

15.2

16.6

13.3

12.1

11.8

11.3

11.9

11.1

11.1

11.0

10.6

11.6

11.7

13.8

5.1

5.9

6.4

7.4

7.3

7.0

15.3

22.0

29.8

32.6

34.7

36.37.9

10.7

11.5

13.3

16.4

19.7

0 0 0 1 1 1

20-24

25-34

35-44

45-54

55-64

65+

1 day 2 days 3-5 days 6-10 days 11-20 days 21-30 days 31 days or more

Source: US Bureau of Labor Statistics, Nonfatal Occupational Injuries and Illnesses Requiring Days Away From Work, 2011 (Table 11), released November 8, 2012.

Over one-third of days-lost cases of older workers involved a month or more away from work. And virtually 9 of 10 cases were

for at least two days, compared to 8 of 10 for the youngest workers.

41

Older Workers Are MuchMore Likely to Break a Bone

3.1 3.7 4.0 4.35.9 6.4

15.313.4

9.9

7.47.86.7

0

2

4

6

8

10

12

14

16

18

20-24 25-34 35-44 45-54 55-64 65+

Fractures Multiple Traumatic Injuries

*per 10,000 full-time-equivalent workersSource: US Bureau of Labor Statistics, US Department of Labor at http://www.bls.gov/news.release/pdf/osh2.pdf Table 14

Incidence Rate* (2011)

42

Older Workers Are More Likely to Slip When Walking, but Less Likely to Overexert Themselves

10

.9 12

.7 17

.0 22

.3

30

.6 35

.1

34

.7 37

.7

44

.3 49

.6

39

.6

23

.8

10

.212

.1

12

.8

11

.4

10

.5

9.9

0

10

20

30

40

50

60

20-24 25-34 35-44 45-54 55-64 65+

Vehicles Floors, Walkways, etc. Overexertion

Source: US Bureau of Labor Statistics, US Department of Labor at http://www.bls.gov/news.release/pdf/osh2.pdf Table 14

Incidence Rate (2011)

Source/Nature of Injury:

Incidence rate for injury caused by vehicles is

about the same for all age groups

6. The Obesity Epidemic

43

In 1994, in no state was the percent of adults who were obese as high as 20%.

By 2010, all 50 states had adult obesity rates of 20% or more. In 12 states, 30% of the

adults were obese.

46

32%

31%

32%

30.4%35%

20.7%

47

The Most Obese Workers File Twice as ManyWC Claims as Healthy-Weight Workers

75

.21

40

.97

60

.17

14.19

18

3.6

3

11

7.6

1

5.535.80

7.05

10.80

8.81

11.65

0

20

40

60

80

100

120

140

160

180

200

BMI <18.5(Underweight)

18.5-24.9(HealthyWeight)

25-29.9(Overweight)

30-34.9 (ObeseClass I)

35-39.9 (ObeseClass II)

40+ (ObeseClass III)

Los

t W

ork

day

s p

er 1

00 F

TE

s

4

6

8

10

12

Cla

ims

per

100

FT

Es

Lost Workdays Claims

Source: Ostbye, T., et al, “Obesity and Workers Compensation,” Archives of Internal Medicine, April 23, 2007.

The most obese have twice as many claims and 13 times

more lost workdays than healthy weight workers

48

WC Medical Claims and Indemnity Costsare 5-10x Higher for the Most Obese Workers

$7,1

09

$13,

338

$19,

661

$3,9

24

$5,3

96 $13,

569

$34,

293

$7,5

03

$51,

091

$23,

373

$23,

633

$59,

178

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

BMI <18.5(Underweight)

18.5-24.9(Healthy Weight)

25-29.9(Overweight)

30-34.9 (ObeseClass I)

35-39.9 (ObeseClass II)

40+ (ObeseClass III)

Medical Claims Costs Indemnity Claims Costs

Source: Ostbye, T., et al, “Obesity and Workers Compensation,” Archives of Internal Medicine, April 23, 2007.

Indemnity costs are 11 times higher for the most obese workers than for

healthy-weight workers.

49

Additional (to WC) Costs of Obese Workers

$148$824

$1,269$277

$657$391

$1,010

$3,792

$475$85

$1,026

$0

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

25-29.9 (Overweight) 30-34.9 (Obese Class I) 35-39.9 (Obese Class II) 40+ (Obese Class II)

Medical Claims Costs Absenteeism Presenteeism

Source: Finkelstein, E., et al, “The Costs of Obesity in the Workplace,” Journal of Occupational and Environmental Medicine, Volume 52, No. 10 (October 2010), pp. 971-976.

The most obese workers cost employers for greater medical

care and by being less productive (by being absent more and being

less productive when at work.

Estimated Per Capita Costs

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