Home > Property & Casualty > Storm clouds loom over Workers Compensation market

Storm clouds loom over Workers Compensation market

With the economy in slow recovery for the foreseeable future, we are taking the time to look at how this will affect the Workers Compensation marketplace. The NCCI (National Council on Compensation Insurance) has recently focused on several factors which, in part, drive the workers compensation market. Some of these factors include unemployment, industrial production, disposable personal income, and corporate profits – all putting pressure on the Workers Compensation market to harden. And the longer the workforce remains unemployed, the greater the need will be for training as this workforce re-enters the workplace. The result of companies learning to operate in this sluggish economy will produce permanent changes in the make-up of the labor force and ‘doing without’ will be the norm.

Currently, most wage growth occurring is in the service or clerical driven payrolls. Industrial, contracting and home building payrolls are flat. These are the key drivers of Workers Compensation premium growth. Medical inflation has not been deterred in a slow economy. The aging workforce and the obesity problem will continue to put added pressure on medical inflation. According to Moody’s, medical inflation is projected at 3.6% for this year. Finally, the Federal Reserve has pledged to keep the downward pressure on interest rates for the foreseeable future. The lack of investment income will not push the Workers Compensation segment to profitability. All this leads to fewer insurance carriers willing to entertain specific risks, a decrease in a carriers willing to credit rates, and the type and structure of loss responsive programs will change.

When looking for coverage in the hardening Workers Compensation market, there is an alternative in The State Fund and Assign Risk Pool. Twenty-two jurisdictions have created competitive funds to vie with commercial insurers for workers compensation business in their markets. Click here to view WGA’s latest White Paper on dealing with the changing Workers Compensation marketing, including an outline of the various state fund programs available.

As the Workers Compensation market hardens, it is important to be prepared to react and be educated on all the options available. For more information, contact your Client Executive at WGA.

About the Author

David Bardelli is a Senior Vice President in the Property & Casualty Group and the Casualty Practice Leader for WGA. David has extensive knowledge with casualty risks, including technology healthcare, business services and miscellaneous manufacturing groups of all sizes.

617.646.0257 DBardelli@wgains.com Connect with David on LinkedIn

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