Workers Comp Hit by Rates, Rising Medical Costs & Underwriting Losses
In the last year or so, we have seen Workers Comp rates continually rise. California was hit with an increase in earlier this year of 37% and most recently the state’s insurance department approved an 8.25% workers comp advisory pure premium rate hike for new policies and those renewing on or after July 1. New York filed a rate increase of 11.5% for October 2012, following a big increase last year. And, New Jersey had an increase this year of 6.9%.
Additionally, there will be a change in experience rating primary/excess split point, as announced by the National Council on Compensation Insurance (NCCI Holdings). For the past 20 years, the portion of losses under the Experience Rating Plan considered “primary” has been set at $5,000. The amount over $5,000 is considered an “excess” loss and discounted by a weighting factor. During this time, the average cost of a claim has tripled due to rising medical costs, according to the NCCI. Therefore, as of 2013, the amount considered primary will increase to $10,000. In 2014, the split point changes to $13,500, and in 2015 it will become $15,000. Primary losses have a greater impact on the mod than excess losses, therefore those employers with poor claims experience will face major experience mod increases, driving up their rates.
We’re also seeing some of the major carriers are reducing their books of business while others are aggressively tightening their underwriting guidelines. The industry as a whole is running a combined loss ratio of 1.20. You have insurers finding it difficult to make Workers Comp a profitable line of business.
This is all challenging news for employers who are struggling in a fluctuating economy where revenues are down, payroll is either flat or has decreased, but they’re seeing their Workers Comp rates going up. In addition, the excess workers comp market is firming, with increases in rates and self-insured retentions, especially where an account has an unfavorable loss experience. Many insurers are underwriting on an account-by-account basis and taking the necessary action based on the specific experience of that account.
At Caitlin-Morgan, we specialize in Workers Compensation.
Let and can help your agency with your clients’ accounts. We have a distinct advantage due to our continued, strong underwriting expertise. Our staff has many years experience in the areas of underwriting, claims management, and loss prevention. Whether your client is a minimum premium account or a tougher to place risk, Caitlin Morgan is here to help you meet your clients’ needs. Give us a call at 877.226.1027.