Business Insurance – July 1, 2012

Rising medical costs, insurer profitability affect overall pricing

Employers renewing their workers compensation policies likely will pay more for the coverage as claims costs rise and insurers' combined ratios deteriorate, experts say.

Purchasers of primary and excess workers comp insurance are seeing price increases, mostly in the single-digit range, brokers and insurers say, but insurers are fighting to hold on to favored accounts.

There also have been some increases in employer retention levels as insurers tighten their underwriting standards in an attempt to improve the line's profitability, they say.

“What we are seeing happening this year is that there is a growing recognition that changes need to be made in terms of workers compensation profitability,” said Curt LeBeau, vp of insurance operations in Milwaukee for United Heartland, a unit of Accident Fund Holdings Inc. “And I think most carriers are taking some type of action to try to improve their results in the workers comp line.”

Brokers also say underwriting standards are tightening.

“They are actually underwriting and looking at losses,” said Bob Jacobsen, area vp for brokerage Arthur J Gallagher & Co. in Chicago. “The discipline is certainly back in the marketplace and, unfortunately for buyers, that means they are all going to pay more, at least in the guaranteed-cost market.”

In general, the “cream of the crop” among guarantee-cost accounts are experiencing price increases ranging from about 5% to 7%, with some 10% increases, particularly in the Midwest, Mr. Jacobsen said. Similar accounts with loss-sensitive programs may see their pricing stay flat, “but those are harder to come by,” he added.

No matter how bad or how well you're doing at managing your workers compensation claims, your renewal workers comp premiums are on the rise! In addition to state rate increases, insurance companies are buckling down as they continue to lose money year after year. Insurance companies are watching the accounts that they're writing now and looking more closely at the losses of each account. Some accounts will just see rate increases, while others will see rate increases plus big scheduled debits on their policies due to bad loss experience. No matter what, you can easily obtain refunds on your past and current years and obtain savings on future years for you to keep with no out of pocket expenses. Workers compensation premium recovery is the only solution to go back on prior and current policies for refunds and is the best and quickest way to obtain a better underwriting profile to enter the renewal marketplace with.