A Warning Sign for Workers Comp Insurers...(and employers)

A new study by an analyst group concludes that a number of Workers Comp insurers are dangerously thin on their reserves, leaving them vulnerable to sudden shocks that, in the past, have undermined the financial stability of insurers.

This study suggests insurers have been keeping reserves too low, which means that if and when the insurers take action to address the deficient reserves, this will result upward pressure on rates on premiums for employers.

More ominously, it suggests that some insurers might be vulnerable to financial shocks. In the past, some well known and long established Workers Comp insurers have failed fairly unexpectedly, producing significant stresses for employers who rely on the insurance market to handle their Workers Comp coverage.

Workers Compensation is a notoriously difficult line of insurance to successfully underwrite in the long run, and more than one insurer thought they were smarter than the average bear, until reality and under-reserved claims unexpectedly proved them very wrong.

Oklahoma Entering New Territory Re: Workers Comp

Oklahoma has now enacted significant changes (and had those changes upheld in court) to their Workers Comp system, altering how claims are adjudicated and also giving employers the option to satisfy their Workers Comp obligations in an alternative manner. Although it has been compared to the Texas rules that allow employers to "go bare", that is, forego Workers Compensation coverage, Oklahoma's new rules are something different. Oklahoma now gives employers the option to establish alternative coverage for workers in place of the traditional Workers Compensation insurance policy.

Not sure how well this new system will actually work for employers and employees, but you can read more about it here.

Would You Buy Your Company's Workers Comp Insurance From Overstock.com?

...because Overstock.com is now selling Workers Compensation insurance, along with other lines of commercial property/casualty insurance, as well as personal lines. And I see Wal-Mart has just started selling Auto insurance (personal lines, I presume).

I strongly suspect that Overstock.com will not be competing on large accounts anytime soon. But this is, after all, very early days for this venture, which is in partnership with Insuritas. But it certainly feels like just the start of something big, something that may revolutionize the hidebound insurance delivery system.

The question remains, of course, what may be lost with this revolution, and what will be gained? For smaller employers, this could be a useful innovation, as smaller employers have often gotten short shrift from the traditional insurance system. But will getting commercial insurance from the likes of Overstock.com be better? Perhaps the implied improvement in electronic paper trail might offer some benefit to policyholders, as the occasional failings and oversights of the traditional analog system are replaced with something more reliable. But we have also seen spectacular screw-ups in the digital age, with information breaches and the like at supposedly large and reliable companies.

We are boldly going into new territory here, and only time will tell about the relative merits and demerits of this new development. The only thing I am confident of, at this point, is that Overstock.com will soon have competition for the online sale of commercial insurance.