The 2013 workers’ compensation insurance market shows a few emerging & concerning patterns. With costs increasing left, right and center it is looking like the workers’ compensation landscape will be a challenging one to navigate. All together, the outlook is rather bleak in some respects.
Rates
Rates are continuing to firm up. Generally they aren’t as flexible as they previously were and what’s more; it’s looking like they will remain fixed for a long time. Also the market is getting smaller and more competitive. These factors are making workers’ compensation insurance becomes a difficult market to be trading in.
Cost
Over time the operating expenses of providing workers’ compensation insurance have overtaken the premium income. That is to say insurers are paying out more than they are taking in. This is in line with increased cost of living and growing cost of medical bills. The combined ratio has averaged an alarming 114% over the last four years. For every $1 an insurance provider collects in premiums, they are paying out on average $1.14 in claims, compensation and expenses. It is thought that this pattern is going to continue as costs continue to rise.
Profits
Furthermore, net premiums are down by nearly 30% when compared to figures from five years ago. This could be a result of a number of things, such as increased unemployment or having to reduce prices to remain competitive. On top of this, medical costs are increasing at an alarming rate – almost double the rate of inflation. With this in mind, if medical costs continue to increase net profits are set to fall further.
2013 isn’t looking overly promising for workers’ compensation insurance. With increasing costs and falling premium income, the workers’ compensation insurance landscape is set to become very demanding for those involved.
