Workers’ comp – the near-term outlook

NCCI’s just-published assessment of work comp trends has a wealth of information, much of it well worth contemplation by anyone in the industry.

Here are a few takeaways that jumped out at me.

• Overall the current state of the market is steady – the market and rates are firm, premiums are trending up modestly, frequency is continuing its structural slow decrease, and claims cost inflation appears to be well within acceptable ranges.
• Employment has returned to its pre-recession level, yet the percentage unemployed remains above 6 percent.  Employment drives premium so that’s good news, however there’s plenty of room for that percentage figure to drop even more.
• More specifically, employment in manufacturing and construction, traditionally high-premium industries, remains lower than it was before the recession.  If this picks up significantly, so will work comp premiums and rates.
• If investment yields remain low, we may well see premiums increase as insurers seek to offset the decline in ultimate cash flow.
• Medical trend is pretty low as well as the work comp world’s experience parallels group and governmental program results.

Which leads to the key questions – what could change the outlook from “steady”?

• A surge in employment especially in construction will increase injury risk and premium volume.
• Continued low investment returns may force insurers to raise rates.
• An uptick in medical inflation – perhaps due at least in part to cost-shifting – could lead underwriters to push rates up quickly.

What does this mean for you?

Lots of ifs and maybes; fortune favors the alert.