Workers' Comp 'grim market' means rate hikes for many states

Conditions in the Workers' Compensation market appear to be "grim over the near term" according to A.M. Best, the world's oldest and most authoritative insurance rating and information source. Years of rate and premium decreases, rising medical costs, diminishing payrolls and a recent growth in the number of claims have propelled rates to increase in many states.

The combined ratio for Workers' Comp insurers is projected to reach 121.5% for 2011, up from 118.1% in 2010, when "business deteriorated sharply" and the industry's combined ratio rose to the highest level since 2000, Best reported. This mismatch of premiums collected and losses paid out is not tenable, particularly in this uncertain economy.

According to an article in Business Insurance, "Workers' Compensation rates hiked by more states," the National Council on Compensation Insurance (NCCI) has filed for rate increases in 19 of the 38 states that it provides rating services and more are expected.

While the increases are mostly modest, employers of all sizes will see price hikes, although smaller employers are likely to feel the greatest impact. Recognizing the difficult economic environment, state regulators will do everything possible to keep rates low and the increases are unlikely to meet the underwriting needs of comp carriers. Such a dichotomy could have long-term implications for Workers' Comp premiums.