Workers’ Compensation Insurance Market a Moving Target

Workers’ compensation insurance is “in play,” says Preston Diamond, managing director and co-founder of the Institute of WorkComp Professionals, Asheville, NC: www.workcompprofessionals.com

Economic conditions, low interest rates and decreased demand have created a buyer’s market and put pressure on workers’ compensation insurers to remain competitive. Meanwhile, governmental agencies, employers and health care providers continue to take a close look at insurance products and other strategies in an effort to control workers’ compensation costs, Diamond reports.

While 94 percent of executives in the property/casualty industry expect an improvement in profitability in 2011, they are not optimistic about the prospects for workers’ compensation insurance, according to a poll taken this week at the Insurance Information Institute Property/Casualty Insurance Joint Industry Forum.

Broken down by lines of insurance, 86 percent of respondents said they do not expect an improvement in workers’ compensation and 76 percent do not expect an improvement in commercial lines.

Propertycasualty360.com, a national underwriter website, reported today that the poll results are consistent with recent comments from industry executives: http://www.propertycasualty360.com

For example:

• At the forum, Liam McGee, chairman, president and CEO of The Hartford Financial Services, said middle-market commercial insurance pricing “is not rational right now.” 
• Kristian Moor, president and CEO of Chartis, reported workers’ compensation is under-priced and that the company was getting out of the market. 
• In November, Liberty Mutual CEO Edmund “Ted” Kelly reportedly called workers’ compensation insurance a “time bomb on the balance sheet of the industry.”

According to 2010 data from the National Council on Compensation Insurance, the workers’ compensation market has experienced 23 consecutive quarters of rate decreases, starting in early 2003.  

Marsh,in its U.S. Insurance Market Report 2010, Third Quarter Update: Insureds Net Benefits as Downward Rate Pressures Persist 

reports that workers’ compensation rates have declined an average of 5.3 percent: http://www.insurancemarketreport.com/LinkClick.aspx?fileticket=TziR0Ua5iYI%3D&tabid=8002

On the other hand, some industry experts now warn employers that while the soft market is predicted to continue in 2011, proposed and approved rate increases in some states suggest the beginning of a gradual shift toward a harder market.

Experience shows such things tend to be cyclical.