Monday, August 23, 2010

Workers Comp Premium Plunge Not Good News For Employers

In 2009, Workers Compensation insurance premiums plunged. The top 25 WC carriers saw premiums decrease collectively by 13.2%. The entire WC insurance premium volume declined by 12.4%. For some carriers, the decline was more pronounced: AIG saw premiums drop by 22.2%.

This wasn't the result of rate decreases--it was caused by precipitous drops in payroll, as the economic crisis roiled its way through the country. As carriers performed audits for 2009 policies, again and again they saw that large Return Premiums were due policyholders, due to significant declines in payroll.

Now, not only is this bad news for employers in that it reflects slashed payrolls, it also portends an era of tightened underwriting standards by employers. As carriers deal with lower premium volume, they are tightening up their criteria for writing business. The net effect of this will be a significant increase in Assigned Risk policies (and in most states, the Assigned Risk programs carry much,much higher premium charges, and much poorer customer service.)

Oh, and for the folks out in California, their rating bureau, the WCIRB, has announced it wants a rate increase of around 30%. That may never come to pass, due to political pressure, but some significant rate increase seems likely.

So all in all, we would appear to be heading into a period of significantly higher Workers Comp insurance premiums, at least for those employers still in business (more on that in my next post.)

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