Column: Workers' Comp

Optimistic Voices

By: | March 3, 2017 • 2 min read
Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.

Workers’ comp industry optimists expect that President Trump’s economic policies will help propel additional insurer premium volume growth through 2017 and even beyond.

Recent growth in employment and wages are expected to generate billions in new workers’ comp premiums written. Factors like lower business taxes, reduced regulatory burdens and shifts in trade policy espoused by the president could fuel further growth.

“Certainly the proposals of the current president suggest it is quite possible we will have an increase in employment in 2017,” including policies that motivate companies to hire domestically rather than overseas, all of which would add to workers’ comp premiums, said Steven N. Weisbart, senior VP and chief economist at the Insurance Information Institute.

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That would also presumably spread revenue to other industry service providers. More jobs inevitably mean more injured workers to service, especially the newly hired.

Recent growth in employment and wages are expected to generate billions in new workers’ comp premiums written.

Weisbart calls his viewpoint “mildly optimistic.” He isn’t alone. His optimism is shared by others who pay close attention to how economic trends impact the workers’ comp industry.

Shifts in business and economic policies, including potential trade agreement changes, are expected to contribute to a strengthening economy over the next couple of years, said John T. Leonard, president and CEO at MEMIC Group, a Portland, Maine-based workers’ comp insurer.

“There will be an increase in payroll associated with a growing economy, particularly [in construction] and payroll is the cornerstone of the development of premium,” he said.

Yet, doubters suggest President Trump’s actions could backfire.

I write my columns a few weeks before publication and as I craft this particular one, headlines suggest Trump-inspired trade wars could slice gross domestic product and harm trade-dependent U.S. employment.

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Even the optimists know headwinds are always a threat.

We are in the midst of one of the longest economic expansions since World War II, increasing the historical likelihood of a coming recession, Weisbart said. But a recession could get pushed farther out, should Congress go along with the president’s proposals, he said.

There is no shortage of oft-quoted comments about the value of economic predictions. Some point out that even with hindsight, observers never agreed on the Great Recession’s causes, let alone its ferocity.

Perhaps, Yogi Berra said it best with his simple quote, “It’s hard making predictions, especially when they are about the future.”

I don’t agree with a lot of President Trump’s policies. But on this topic I hope Weisbart and the optimists have it right. Not many would disagree that economic expansion is always more fun than contraction. &

More from Risk & Insurance

More from Risk & Insurance

2018 Most Dangerous Emerging Risks

Emerging Multipliers

It’s not that these risks are new; it’s that they’re coming at you at a volume and rate you never imagined before.
By: | April 9, 2018 • 3 min read

Underwriters have plenty to worry about, but there is one word that perhaps rattles them more than any other word. That word is aggregation.

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Aggregation, in the transferred or covered risk usage, represents the multiplying potential of a risk. For examples, we can look back to the asbestos claims that did so much damage to Lloyds’ of London names and syndicates in the mid-1990s.

More recently, underwriters expressed fears about the aggregation of risk from lawsuits by football players at various levels of the sport. Players, from Pee Wee on up to the NFL, claim to have suffered irreversible brain damage from hits to the head.

That risk scenario has yet to fully play out — it will be decades in doing so — but it is already producing claims in the billions.

This year’s edition of our national-award winning coverage of the Most Dangerous Emerging Risks focuses on risks that have always existed. The emergent — and more dangerous — piece to the puzzle is that these risks are now super-charged with risk multipliers.

Take reputational risk, for example. Businesses and individuals that were sharply managed have always protected their reputations fiercely. In days past, a lapse in ethics or morals could be extremely damaging to one’s reputation, but it might take days, weeks, even years of work by newspaper reporters, idle gossips or political enemies to dig it out and make it public.

Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

These days, the speed at which Internet connectedness and social media can spread information makes reputational risk an existential threat. Information that can stop a glittering career dead in its tracks can be shared by millions with a casual, thoughtless tap or swipe on their smartphones.

Aggregation of uninsured risk is another area of focus of our Most Dangerous Emerging Risks (MDER) coverage.

The beauty of the insurance model is that the business expands to cover personal and commercial risks as the world expands. The more cars on the planet, the more car insurance to sell.

The more people, the more life insurance. Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

As Risk & Insurance® associate editor Michelle Kerr and her sources point out, growing populations and rising property values, combined with an increase in high-severity catastrophes, threaten to push the insurance coverage gap to critical levels.

This aggregation of uninsured value got a recent proof in CAT-filled 2017. The global tally for natural disaster losses in 2017 was $330 billion; 60 percent of it was uninsured.

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This uninsured gap threatens to place unsustainable pressure on public resources and hamstring society’s ability to respond to natural disasters, which show no sign of slowing down or tempering.

A related threat, the combination of a failing infrastructure and increasing storm severity, marks our third MDER. This MDER looks at the largely uninsurable risk of business interruption that results not from damage to your property or your suppliers’ property, but to publicly maintained infrastructure that provides ingress and egress to your property. It’s a danger coming into shape more and more frequently.

As always, our goal in writing about these threats is not to engage in fear mongering. It’s to initiate and expand a dialogue that can hopefully result in better planning and mitigation, saving the lives and limbs of businesses here and around the world.

2018 Most Dangerous Emerging Risks

Critical Coverage Gap

Growing populations and rising property values, combined with an increase in high-severity catastrophes, are pushing the insurance protection gap to a critical level.

Climate Change as a Business Interruption Multiplier

Crumbling roads and bridges isolate companies and trigger business interruption losses.

 

Reputation’s Existential Threat

Social media — the very tool used to connect people in an instant — can threaten a business’s reputation just as quickly.

 

AI as a Risk Multiplier

AI has potential, but it comes with risks. Mitigating these risks helps insurers and insureds alike, enabling advances in almost every field.

 

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]