Workers Compensation Market Continues to Deteriorate

Standard & Poors (S&P) recently released their outlook for the Workers Compensation Market.  The title says it all: For the US Property/Casualty Industry, Making Workers’ Compensation Profitable May Be Mission Impossible.”

I have talked about the deterioration of the workers comp market in previous blogs, but we’re really starting to see it in action.  Whether it’s decreasing deviations, no deviations at all, stricter underwriting, or a return to the assigned risk pool for many risks, the firming of the market is now upon us.  S&P states there are years of unprofitability ahead for the workers’ comp market, and they attribute it to:

  1.  Continued high unemployment
  2.  Potential for higher inflation – which leads to higher claims payouts
  3.  Adverse reserve developments
  4. Volatility of the investment market

A key ratio used in the insurance industry is the combined ratio (losses and expenses – compared to premiums).  Contrary to what many may believe, since 1991, there have been only 3 yrs in which the workers comp market realized an underwriting profit (combined ratio under 100%).  The industry was able to offset the underwriting loss through their investments.  No more!

There are interesting days ahead.  In Massachusetts, the WC rates are OK through Sept 1., but the consensus is that we’ll be in for rate increases after Sept 1.  For those with NCCI mods, the rating formula will be changing on 1/1/13, and for many, mods will be increasing.  Implementing cost control measures on the WC side, is going to be even more important going forward.

This information brought to you by Chris Sheppard of Smith Buckley & Hunt Insurance Agency, your Massachusetts contractors insurance agent and Massachusetts business insurance resource.

How NCCI Experience Mods Could Change in 2013

NCCI released a good video on the effect of the change to the workers compensation experience mod formula starting in 2013.  I know I’ve blogged about how mods will be affected in prior blogs, but this is a good video detailing exactly how it will look/work. 

http://bit.ly/yCxLF1

Again, at this time, it’s only for those who have their experience mod’s calculated by the NCCI.  The NCCI calculates mods for those who are “interstate” risks (multi state).  At this time, there hasn’t been any announcement from the Mass WC Bureau if they plan on following the NCCI.  My guess is they will, but probably not in 2013. 

This change could result in mod increases for many.  Stay tuned…..

This information brought to you by Chris Sheppard of Smith Buckley & Hunt Insurance Agency, your Massachusetts contractors insurance agent and Massachusetts business insurance resource.

Construction Job Growth – 2010 to 2020

The Bureau of Labor Statistics recently released their employment projections for the 2010 – 2020 term.  So, how does the construction industry fare?  Well, there’s both good news and bad news. 

They estimate total employment will rise by 14.3%, resulting in an additional 20.5 million new jobs.  Health care jobs are expected to see the biggest growth, but construction is expected to grow substantially as well.  The bad news is, while construction jobs will increase, they will not grow enough to recoup all the jobs lost during the great recession.

I have found, among my contracting accounts, that business as a whole is getting better.  Most of the accounts I’ve met with have increased payrolls, and expect a further increase in 2012.  I guess there really is no place to go other than up from where we were over the last couple of years.  The general attitude is “cautiously optimistic.”  The last few years have been difficult for everyone, but for those of us that remain, we truly are stronger organizations.

This information brought to you by Chris Sheppard of Smith Buckley & Hunt Insurance Agency, your Massachusetts contractors insurance agent and Massachusetts business insurance resource.

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