Workers’ Comp Premiums Up 1.0% in First Half of 2017
Workers’ compensation insurers reported a modest increase in direct written premiums — a 1.0 percent increase — during the first six months of 2017 versus the same period in 2016.
Workers’ compensation direct written premiums have increased for seven straight years, according to a review by Demotech Inc. of second quarter 2017 data, as recently reported by insurers to the National Association of Insurance Commissioners.
Written premiums at mid-year 2017 of $27.7 billion are at an all-time high from the mid-year 2010 low of $18.8 billion. However, the growth rate has consistently slowed over this period, from a 9.5 percent increase in 2011 to a 1.0 percent increase in 2017.
The top 25 workers’ compensation insurers show a much higher growth rate in direct written premium. The top 25 ranked by the highest dollar amount of direct written premium growth, reported a 26.6 percent premium increase during the first six months of 2017 versus the same period in 2016. All other workers’ compensation insurers combined reported that premium decreased by 2.9 percent.
Ten of the insurers in this year’s top 25 were also in last year’s top 25.
Insurer groups having three insurers in the top 25 include AmTrust and Berkshire Hathaway. For AmTrust, only Wesco Insurance Co. was in last year’s top 25. For Berkshire Hathaway, NorGUARD Insurance Co. and Redwood Fire and Casualty Insurance Co. were in last year’s top 25. Most of the other top 25 insurers are members of large national and international insurer groups.
Several of the top 25 insurers specialize in fronting arrangements or program business. These include Benchmark Insurance Co., Falls Lake Fire and Casualty Co., Safety National Casualty Corp. and State National Insurance Co.
Two of the top 25 insurers wrote 100 percent of their workers’ compensation premium in California: Falls Lake Fire and Casualty Co. and Cypress Insurance Co. Premium growth from these insurers is notable since the Workers’ Compensation Insurance Rating Bureau of California reported that the industry average charged rate has decreased by about 10 percent during the first six months of 2017 versus the same period in 2016.
The top 25 ranked by the amount of direct written premium growth, reported a 26.6 percent premium increase during the first six months of 2017.
At its 2017 Annual Issues Symposium, the National Council on Compensation Insurance (NCCI) reported that workers’ compensation has had a combined ratio lower than many other lines of business over the past few years. This is good news as it implies that loss frequency and severity were lower than anticipated. However, rate decreases often follow periods of great profitability. NCCI has filed, or anticipates filing, loss cost decreases in almost all states where it makes filings. The loss cost decreases are likely to more than offset expected payroll growth, which means the industry could observe a decrease in direct written premium for 2018 versus 2017.
In addition to these loss cost changes, social trends and advances in technology continue to transform who, what, when, where and how work is done.
Workers’ compensation was originally created to protect human workers in the industrial age. Robots, artificial intelligence and self-driving cars potentially could replace these workers. Will there be any workers left to compensate? Insurers and insurance legislators will need to continue responding to these changes with innovative products and services.