Workers comp rates continue to fall while loss ratios tighten up. Rates began falling overall nationally since 2015 based on a majority of state filings from The National Council on Compensation Insurance (NCCI).
The NCCI reported that it has filed 32 of the typical 38 filings, which provides a good look into the state of premium changes within workers compensation. Apparently, the rate of change for any given state is small, mostly single digits either way, and of the 32 filed, 23 include a decrease in premium filed, 8 states are moving higher, and Illinois, the state to my south is simply amending instead of creating a new filing.
Notable moves include Virginia with a 3.4% overall increase and Oklahoma with a head spinning free fall drop of 14.8%. Otherwise, expect most of the other filings to be within plus or minus about 5% compared to the previous year.
There's more good news for insurers from the filings. The combined ratio is 98%, which is a positive sign that not only have the rates reached an interim top, albeit may continue to fall as insurers are likely to seek greater market share if the book can remain profitable. It's a little early to break out the glasses and bottle of bubbles as the numbers remain preliminary and require verification after the dust settles.
For employers, the numbers suggest a stable outlook for premiums and that's almost always welcomed news. The ability for employers to budget their labor expense in a meaningful way allows for greater job growth and upward wage pressure.
Donna Urben, vice president and workers compensation product manager at Erie Insurance stated “This is approximately the third-plus year of consecutive loss cost decrease, for a majority of the states,” and (rates) “are driven by frequency and severity trends”—and that “frequency trends have been on the decline for many years now.” according to Independent Agent magazine.
Matt Lyon, head of workers compensation at Farmers Insurance Group and its subsidiary Foremost Insurance Group, says workers comp insurers are enjoying a profitable experience in workers compensation underwriting and added “Most companies are profitable, investment returns are low, and you couple that with negative rates coming through—I would describe it as a very competitive market going into 2016,” he says. “You’ll see that balanced with a sense of discipline because carriers don’t want to repeat the mistakes of the past.” Foremost Insurance Group is a carrier we work with for home, auto, motorcycle, dwelling, and specialty coverage in several states.
According to Lyon, carriers should expect to see greater markets in high-hazard business as carriers reach for premium and that's a welcome sign for many employers – “Companies have really good underwriting margins right now, so they’re looking to grow,” he points out. “As an example, for people that do roofing, years ago many carriers would have said, ‘No, that belongs in the E&S market or the assigned risk market.’ But we’re starting to see more carriers entertain those kinds of risks now.” As an agency that has many roofing contractors for clients, seeing greater workers compensation insurance providers available is fantastic news. Normally, I place roofing and many other class codes into any given state's assigned risk pool. It's a shame because I believe the pool is profitable overall, meaning carriers are missing opportunity.
Robert Weinstein is a husband, dad, stock market junkie, real estate broker, and of course…Insurance agent. Interests include my family, economics, marketing, technology, real estate, finance/investing, history, and Asia.
Robert’s insurance expertise includes having the designation of Certified in Long-Term Care (CLTC) and assist in asset protection for families with members entering retirement.
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