NCCI President Stephan Klingel led off this year’s NCCI Annual Issues Symposium with a brief intro, and his lead in wasn’t exactly encouraging, predicting a ‘precarious’ outlook for the workers comp market.
The factors that led NCCI to characterize work comp’s future as precarious were the recession, recovery, Federal environment, and other external factors.
Remember, Klingel’s comments reflect what happened over the last couple years and the uncertainty driven by those factors. And there’s no question the recession and other factors have had a huge impact on comp; in fact private carrier net written premium (NWP) dropped by almost twelve points ($5.2 billion) over the last year.
That’s bad. What’s much worse is comparing 2009 to 2005, which shows a decrease of $13.7 billion in NWP for private carriers and state funds. That’s a drop of 29%.
This is a result of a decline in three areas: the number of workers employed; the hours those employed workers actually worked; and the industries most affected by the recession – manufacturing and construction. Those two sectors account for a fifth of payroll, but 40% of work comp premium.
As these are two of the most important industries to work comp, it isn’t a surprise that comp premiums declined dramatically.
As recovery continues, NCCI expects frequency will, if not increase, at least level off from teh past two decades of annual declines.
Klingel got into some detail re the provisions of the reform law that directly impact workers comp, focusing on the changes to black lung.
One of the more interesting points was a brief discussion of the potential for medical cost shifting; Klingel stated that work comp is the largest single source of reimbursement for the health care system that is not regulated in some way by the Federal government. (I don’t agree with the premise, which requires one to equate the mandatory medical loss ratio as Federal control over medical payments, an ‘equation’ that requires a couple leaps)
More Federal involvement with insurance is likely, according to NCCI’s President, who believes there will be a Federal office of insurance information (name tbd) – this requires legislation to be passed by Congress and signed into law by President Obama, after which the regulation writers would control the actual implementation.
The ‘Baca bill’ continues to languish, although there may (operative word being ‘may’) be some implications for a Federal insurance office.
May
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