Workers comp financials are getting better and better, although more and more that’s due to California.
NCCI, the leading research industry in the work comp business, has just released a 65 page report on the state of the line Here are a few factoids followed by an interpretation and implications of same.
1. WC premium is not growing; although private insurance is up ever-so-slightly, the total premium spend is down a bit due to declining premiums at state funds. How? Price pressure on insurers.
2. The net combined ratio for WC is a projected to be a dancing-in-the-streets 96.5%, a result that is not only the best in memory, but is also bringing much joy to even the most jaded insurance exec.
3. The decline in premiums can be attributed largely to one state – California. Gross written premiums are down by almost 30% since 2004. And that decline is likely to continue – the loss ratio is a stellar 65% (projected 2006).
4. But we still don’t have medical under control – medical costs now eat up 59% of the claims dollar. And WC medical costs are going up twice as fast as overall medical inflation.
5. The cloud on the horizon is just that – if this turns out to be a bad year for disasters of any origin, WC rates will bounce up.
What does this mean for you?
Lower rates mean reduced expenses for employers, lower commissions for brokers and agents, belt-tightening for insurers and especially TPAs, and less emphasis on controlling claims costs.
Depending on what’s on your business card, these could be good, or these could be bad.
