In its 2015 State of the Line worker’s compensation market analysis, the National Council on Compensation Insurance (NCCI) this month described the current state of the industry as “calm now … but turbulence ahead.” NCCI gathers data, analyzes industry trends, and prepares objective insurance rate and loss cost recommendations.
According to the NCCI report, the workers’ compensation calendar year combined ratio for private carriers was 98 in 2014, a four-point decrease from 2013 and a 17-point decline since 2011. Total market net written premium increased by approximately 6% to $44.2 billion, driven primarily by an increase in payroll.
“The most recent results show that 2014 was a good year for the industry—and that follows solid results in 2013,” said NCCI President and CEO Steve Klingel. “It would be great if these results marked the beginnings of a new trend line, but ours is a business that runs in cycles. And despite the current calm conditions, we are anticipating turbulence ahead.”
Why the troubled workers’ compensation outlook? According to the NCCI, ongoing threats to exclusive remedy, the risk of benefit increases without appropriate rate adjustments, and the rapidly changing nature of the U.S. workforce and workplaces, is trying the workers’ comp space on all sides today. “While I am confident that we will work our way through these challenges, it is important to be realistic about current conditions and to recognize that the current positive results may not last,” stated Klingel.
Additionally, according to NCCI Chief Actuary Kathy Antonello, while there is good news, such as having a combined ratio below 100 for the first time since 2006, experiencing a second year of above-average operating gains, and a continued decline in claim frequency, there are signs of trouble. “Medical severity increases have begun to outpace increases in the average weekly wage and medical consumer price index, low interest rates continue to make investing a challenge, and employment in some sectors of the economy—particularly construction and manufacturing—remains well below pre-recession levels, noted Antonello.”
The Sharing Economy and Potential Impact on Comp
With regard to our economy and how it may impact workers’ compensation down the road, one key element to look at is the evolution of our sharing or on-demand economy. Companies like Uber and others have made it easy for consumers to contact people to do ad-hoc jobs – from ride-sharing to dog-walking to house cleaning and many other services. Dr. Robert Hartwig, president of the Insurance Information Institute (I.I.I) and an economist, noted in a recent report that these workers are independent contractors (although this is being challenged) and as such don’t get traditional benefits, including workers’ comp coverage. As the sharing economy grows, workers’ comp could shrink.
Caitlin Morgan specializes in providing workers’ compensation coverage to a broad spectrum of clients on a national basis. We can help you secure coverage for insureds with a minimum premium as well as those hard-to-place risks. We can also help clients implement robust safety programs, remain OSHA-compliant, prevent fraud and abuse, and stem losses. Give us a call at 877.226.1027 to find out more about how we can help you in the workers’ comp space.
Sources: NCCI, I.I.I.