Market Outlook

Workers’ Comp Renewals Stable for 2016    

While insureds with losses can expect an increase, others can look forward to level pricing or even modest discounts.
By: | December 17, 2015

Employers with good loss histories looking to renew their workers’ compensation insurance coverage for 2016 will likely encounter insurers holding their prices relatively level to retain the business.

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“Overall, the market is as flat as it has been for years,” said Pam Ferrandino, executive vice president, national casualty practice leader at Willis.

Insurers are seeking price increases for workers’ comp accounts with losses, and providing single-digit discounts for those with solid loss histories they want to retain.

Debbie Michel, executive vice president and general manager of national insurance casualty, Liberty Mutual

Debbie Michel, executive vice president and general manager of national insurance casualty, Liberty Mutual

“When it all adds up it’s relatively flat,” Debbie Michel, executive vice president and general manager of national insurance casualty at Liberty Mutual, said of current market conditions. “It has been that way for about six months.”

And in a recent sign of market competitiveness, some insurers are now selectively providing large, national accounts with workers’ comp insurance contracts providing coverage for two years, Michel added.

But obtaining a multi-year contract requires “the right risk,” that is “stable, high quality and well priced.”

Specific factors, such as purchasing monoline coverage for California risks or employee concentrations exposed to terrorism risks in large cities, may receive additional underwriter scrutiny, said Christopher Flatt, leader of Marsh’s Workers’ Compensation Center of Excellence.

But in general, buyers are finding a competitive market and even those accounts will find coverage.

The workers’ comp line is performing well for insurers, fueling their ability to provide pricing that preempts policyholders and their brokers from marketing their accounts, Flatt added.

“It was [a good market] last year for employers; it’s probably better this year,” he said.

Most accounts are experiencing rate increases or decreases within 2 percent, meaning the market is flat, agreed John J. Liston, area president in Tampa, Fla. for Arthur J. Gallagher & Co.

“It’s a pretty easy market to place comp in unless you really have a bad issue,” Liston said.

The excess insurance market for workers’ comp coverage renewing on Jan. 1 is also competitive, with more underwriters seeking the business, said Seth Smith, senior vice president of underwriting at Safety National.

Yet, accounts with losses are seeing rate increases.

“However, if it has been a good, clean account and they have their losses under control and are doing a good job, we are seeing flat to decreases,” Smith said.

Data Makes a Difference

Meanwhile, brokers and agents say that more than ever, they are helping workers’ comp insurance buyers wield loss data to improve their purchasing decisions and obtain favorable terms.

In contrast to years past when agents approached underwriters by pleading, “Ah come on man, give me a break on this deal,” brokers are increasingly able to drill deeper into a client’s historical claims data to present intelligent arguments for better pricing and conditions, said Mark Bizer, senior vice president, Assured Neace Lukens in Lexington, Ky.

“We just have a lot more tools than we used to,” Bizer said.

“We are using our tools, really trying to push the market to right-size client retentions.” — Pam Ferrandino, executive vice president, Willis

Analytic tools and market conditions are allowing insurance purchasers to evaluate and adjust their retentions, Ferrandino agreed.

In some cases they are relying on analytic tools to select customized retention levels rather than selecting traditional deductible amounts of $500,000 and $250,000, for example.

“We can now look at clients’ retentions and maybe model them at $350,000 or other thresholds which might have a more efficient breakpoint where there is discernable savings,” Ferrandino said.

“We are using our tools, really trying to push the market to right-size client retentions.”

Insureds may take advantage of market conditions to reduce their deductible, even paying more in premium, to reduce their collateral expense, she added.

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Overall, however, several brokers said they are not seeing significant shifts in deductible levels.

Insurer profitability and premium growth have contributed to underwriters’ ability to exercise flexibility in their pricing, several experts agreed.

NCCI’s “State of the Line” report released in May indicated that workers’ comp insurer combined ratio dropped to 98 during 2014. That represented a 4 percent decrease from the prior year.

It was the first time since 2006 that the ratio fell below 100, pointing to a second year of above average insurer operating gains.

Insurers are evaluating accounts to determine whether they must demand higher pricing for poor loss histories, Bizer said. But they are being “a little more flexible” when policyholders experience a “one-off claim.”

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.

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The R&I Editorial Team can be reached at [email protected]