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Employers buying workers compensation coverage in early 2018 are typically seeing slight rate decreases or flat renewals as the competitive market place of the past several years continues, according to brokers.
Improved underwriting results, abundant capacity and reforms in various states have kept a lid on increases for most accounts, they say.
Stephen Hackenburg, New York-based chief broking officer for the national casualty practice of Aon Risk Solutions, said 40% of Aon clients saw decreases in comp insurance costs.
“There are a lot of people chasing the business,” he said, adding other components helping to create a competitive marketplace: “Payrolls are up and strong. The industry is seeing good underwriting results and there is a lot of competition. That portends a healthy climate for buying insurance.”
Improved loss experience is leading to lower rates, said Mark Moitoso, Atlanta-based national analytics practice leader for Lockton Cos. L.L.C.
“We’re seeing continued price declines,” he said. “Combined ratios have continued to be good.”
The workers compensation market’s combined ratio has improved over the past couple of years.
The Boca Raton, Florida-based National Council on Compensation Insurance Inc. estimates the yet-to-be-tallied 2017 combined ratio to hold steady from 2016 figures at approximately 94%, which would represent the third consecutive six-point underwriting improvement for an industry that has posted combined ratios of less than 100% only three other times since 1990, according to its reported issued in November 2017. In 2010 and 2011, combined ratios reached 115%.
The estimate for 2017 is based on private insurer direct calendar year incurred losses, direct earned premium and historical net to direct ratios, according to NCCI.
“We view the workers comp marketplace as a competitive and likely the most profitable line for carriers today,” said Roger Jung, New York-based managing director and New York casualty hub placement leader for Marsh L.L.C. “From our standpoint there is an abundance of capacity in the marketplace and it’s been a competitive line over the last few years.”
State reforms and the cost decreases that come with them are helping to create a competitive marketplace, said Christine Williams, New York-based managing director within Marsh’s Workers’ Compensation Center of Excellence.
For example, California’s S.B. 863, which was signed into law in 2012, ushered in a series of reforms that tackled several aspects of cost containment from workers comp fraud to pharmacy spend.
“They have been able to take out more than $1 billion in losses because of that reform,” she said.
NCCI also reported in November that loss costs have decreased by 7.2% in 2017, on average, with the cumulative decrease since 2000 at more than 25%. NCCI reported that the decrease is primarily the result of improved experience driven by declines in lost-time claim frequency.
The industry’s trending toward workplace safety and automation has also helped keep costs down or stagnant, said Mr. Moitoso. “There is a general trend toward ergonomic (practices), safety, technology… (and) better risk-management practices coming from the C-suite.”