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Workers comp renewals remain stable

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workers comp

Workers compensation midyear renewals were stable, with employers continuing to benefit from a competitive market, experts say.

The coverage line remains profitable for insurers as costs remain in check, and there is little sign of the market changing in the medium term, they say.

“The workers comp line remains very stable,” said Benjamin Powers, Atlanta-based head of primary casualty North America for Willis Towers Watson PLC. 

Many insurers are supplementing other lines with workers comp due to its “positive rate trends,” Mr. Powers said.

“That’s why we’re seeing negative rate in comp,” he said.

Workers comp renewals were “one of the bright spots for both employers and carriers,” said Kapil Mohan, a Chicago-based executive vice president with Rolling Meadows, Illinois-based Gallagher Bassett Services Inc.

Insurers continue to profit from underwriting workers comp policies because of lower loss ratios, and employers saw flat or slightly declining costs because of overall market conditions, he said.

“There isn’t anything that I would say is on the horizon that’s going to significantly change that, or at least no one expects that,” Mr. Mohan said.

Medical inflation is averaging about 3.3% in a flat-to-negative rate environment, and experts are monitoring how rising medical costs may affect workers comp, Mr. Powers said.

“Carriers would like to push rate because of medical cost inflation, but with the whole supply and demand that’s happening, we have an abundance of workers comp capacity in the marketplace,” he said. 

A June benchmarking report by Lockton Cos. LLC showed that pricing for guaranteed cost and loss-sensitive workers comp programs continued to fall in the first quarter of the year.

The report said guaranteed cost programs, where premiums are determined at renewal, were expected to see flat to 5% rate decreases in the second quarter, and loss-sensitive programs, where premiums are adjusted based on individual claims experience, were expected to see a 2% to 3% rate increase.

According to the National Council on Compensation Insurance, workers comp insurers have reported 10 consecutive years of combined ratios under 90%.

While NCCI continues to monitor medical inflation as a potential negative trend for the sector, other cost drivers have been favorable for employers and insurers, said Jeff Eddinger, senior division executive with Boca Raton, Florida-based NCCI. 

“NCCI has been filing almost exclusively decreases to the loss costs for the last several years,” Mr. Eddinger said. “The reasons for that are continued improvement in claim frequency, workplaces continue to get safer, and what we call moderate increases in claim severity or the average cost per claim.”

The decade of workers comp profitability has “perpetuated a favorable market condition for buyers,” said Debbie Goldstine, Chicago-based executive vice president, U.S. casualty, and technical intelligence and emerging risks practice leader at Lockton.

“Unlike liability, where claim costs have escalated due to economic and social inflation, work comp has benefited from highly stable loss trends, where annual increases in severity have been at or below general inflation,” Ms. Goldstine said. “Add to that a favorable interest rate environment, which will continue to provide a nice little tailwind for insurers … (and) it means a very competitive environment for buyers.”

A greater emphasis on workplace safety and a focus on loss prevention and cost control have all “had a positive impact on the renewal market,” Mr. Mohan said.

There are some issues to watch that experts say could potentially affect workers comp, including increasing mental injury claims and a rise in workplace violence, but overall, the picture is generally positive for the line, experts say.

“Our outlook is that work comp will continue its run of profitability for the foreseeable future,” Ms. Goldstine said