We heard it in 2015 and reported it ourselves in both June and November … overall the commercial insurance market has been soft, with competition for buyers on the rise. Even MarketScout recently noted that for overall P&C insurance rates, 2015 ended on another downward note which is positive for insurance buyers.
The workers’ comp market is facing a similar trend, given the large improvement in underwriting profits during the past four years. With combined ratios in the 90’s, underwriters are again looking to grow this line of business. Turning our attention to the new year and focusing on the workers’ comp market, this piece from Business Insurance highlights how employers are seeing flat or lower workers’ compensation policy pricing as insurers work to hang onto profitable accounts during the 2016 renewal season.
The publication reports 2016 workers’ comp rates are flat to down as much as 5 percent and at Lockton we’re seeing similar trends in our renewals. There is ample capacity for workers’ comp, but the biggest challenge is finding markets for large concentrations of employees in major cities.
I’d reinforce one point in the article: the competitive workers’ comp market is prompting insurers to look for ways to keep policyholders that are considered good risks. Insurers know if an account does go into the marketplace, they’ll likely give up more price cuts to retain it. We see accounts with the better loss histories and experience modifications getting even better renewal terms than the average risk. Employers can have a significant impact on their total cost of workers’ comp through safety, claims management, and focus on cost containment.
Overall, the workers’ comp market should continue to be competitive during 2016. With ample capital and recent profitability by underwriting companies, we expect continued opportunity for fixed cost savings and collateral flexibility.
Given many employers retain a level of their own workers’ comp liability, there are also opportunities to find savings in their retained losses. As an example from our ongoing research and data mining, Lockton continues to see the critical role employer communication plays during the claims process, and the impact that managers and supervisors can have in resolving claims. Being responsive to concerns can go a long way.
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