The study found six factors that have contributed to the price volatility of the California Workers Compensation market since rate deregulation happened back in 1995:
• inaccurate projections of claim costs;
• pricing below expected costs;
• reinsurance contracts that gave insurers and reinsurers insufficient stake in the profitability of the policies they wrote;
• managing general agents who had little financial interest in the ultimate profitability of policies;
• underreserving for claim costs by insurers; and
• insurer policyholder surplus that was inadequate to provide a cushion against adverse events.
• pricing below expected costs;
• reinsurance contracts that gave insurers and reinsurers insufficient stake in the profitability of the policies they wrote;
• managing general agents who had little financial interest in the ultimate profitability of policies;
• underreserving for claim costs by insurers; and
• insurer policyholder surplus that was inadequate to provide a cushion against adverse events.
For those interested in understanding the underlying dynamics of what has been creating the market turmoil in California, this report makes fascinating reading (but for those who don't have that interest, of course, not so much.) The study digs fairly deeply into the specific mistakes, misjudgments, and missteps made by carriers and regulators that have contributed to the problem in the Golden State.
No comments:
Post a Comment