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Workers Comp Market Begins to Find Balance

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by Jacquelyn Connelly

Although the breadth of the marketplace means an upswing will likely exclude some classes, expect good things on the horizon for workers comp insurance—as long as legislative inertia doesn’t get in the way.

Pricing Trends

“Overall I think it’s a stable market with moderating price increases,” says Gary Uhlemeyer, senior vice president of workers compensation at 5Star Specialty Programs. “We’re seeing lower rates, more competitive pricing and a broadening of carriers’ appetites.” That said, workers comp is a broad line of coverage, which leaves room for plenty of geographic and segment-based nuances. “For tough-to-place risks, that marketplace is still difficult,” Uhlemeyer says. “There’s a lot of variance by state as well in those types of risks.” The long-haul trucking niche is one example. “A rather limited number of insurance companies deal with trucking exposures, and even fewer will write trucking companies that utilize owner-operators,” says James Obregon, CEO at Trinity Risk, LLC. “As a result, there isn’t much competition, so rates are going up as market availability or capacity is shrinking.”

But on a macro level, “the market continues to improve,” says Peter Burton, senior division executive for state relations at NCCI. “Each year we give out a buzz word that describes the global workers compensation marketplace, and this year the word is ‘balanced.’” That’s certainly an appropriate description considering data from the NCCI’s latest filing cycle of 38 states nationwide: 19 posted increases and 19 posted decreases. “Each state is its own microcosm, but if the aggregate trickles down to the individual states, we should probably see a very continued or improving pattern over previous years,” Burton says.

On the Horizon

What market factors point to continued improvement for workers comp? Burton cites ongoing premium growth, which is a reflection of payroll improvements. “The economy is rebounding and more people are working in some of the more hazardous occupations where you get a lot of payroll,” he explains. “Construction and manufacturing are showing some growth, and they tend to produce a higher amount of premium.” Another factor is a decline in workplace injuries. “Frequency went down 2% just in this last year’s data,” Burton says, noting that the numbers mark a long-term trend in not only the U.S. economy but in European nations and Japan, as well. “Companies are more focused on workplace safety, utilizing a lot more robotics and mechanized work. That helps keep injuries down while premiums are going up—hence we have a better combined loss ratio.” Beyond that, pending legislative action weighs heavy on workers comp predictions. “The biggest issue affecting all carriers is what will happen with the extension of TRIA,” Burton says. “Under the assumption that Washington will act either prior to election or post-election and workers comp results continue to be positive, I think the market should be healthier for agents.”

Meanwhile, health care reform presents its own set of challenges to the workers comp marketplace. In the long-haul trucking niche, for example, the practice of outsourcing will continue to rise for those looking to avoid the looming cost increases associated with the ACA. “We’re seeing more trucking companies move away from employee drivers and toward independent contractors to stay below that 50-employee threshold,” Obregon explains. “People will keep looking at the uncertainty of how health care reform will impact workers compensation and the continuing concern about the lagging but improving construction and manufacturing employment,” Burton adds. “How will that industry continue to recover so that workers compensation can continue to improve in payroll growth?”

Jacquelyn Connelly is IA senior editor.


Andrew McElhannon is the Member Services Coordinator for the Independent Insurance Agents of Georgia, and can be contacted at: or b y phone at 770-458-0093, x.110, or 800-878-6487.GAlogoleft

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