Workers Comp Oklahoma State Fund Shrinks
The Oklahoma state fund also known as CompSource has lost more market share.
As I am originally from Oklahoma, news from the state on Workers Comp is of high interest to me.
In this case, CompSource Oklahoma, the state-created workers’ compensation insurer, has been losing ground in its net number of policies at a steady clip since 2006.
According to CompSource, there is no regret for the loss in market share. CompSource’s lost policies are an indication of the strength of the private insurance market at the moment. But the data also indicates that hard times for the market may be on the horizon, as private insurers increasingly become the victims of their success.
According to CompSource Oklahoma, private insurers may increasingly find themselves between a rock and a hard place as they balance the need to keep written premiums low with continued increases in medical costs. Workers’ comp reforms in several states have shown success in reducing the number of claims filed, but the cost of the average claim has grown enough to significantly erode the benefits of lowered frequency.
According to the latest NCCI report, the frequency of claims per 100 workers has declined from 1.7 to 1.1 between 1997 and 2006, but the annual increase in medical care costs per claim averages 8.5 percent over the last five years. Medical care costs are growing faster than the overall Consumer Price Index medical care costs, NCCI reports, accounting for 59 percent of total claim costs in 2007.
Demand for insurance coverage declines during times of economic recession, as employers try to cut costs. At the same time, studies show more workers are likely to file claims during times of economic hardship. Employers may also cut spending on safety-related budget items, contributing to a rise in claims.
The leading private insurer in Oklahoma, AIG, holds 15 percent of the market share. CompSource was the leader in market share in Oklahoma during 2007, at 37.8 percent. During the last hard market cycle, in 2005, CompSource’s market share peaked at 46.9 percent.
Overall, I think that Compsource may be in a state of denial. Losing market share every month may be due to other factors. From what I have seen, quasi-monopolistic state funds have all had problems when they are state-created.
Such prime examples are:
- California – State Compensation Insurance Fund (SCIF)
- West Virginia – Brickstreet
- Nevada – Employers Holdings Inc.
- North Dakota – Workforce and Safety (WSI)
- Ohio – Bureau of Workers Compensation (BWC)
Why do state-created monopolistic and quasi-monopolistic funds have problems? Please check in with us on Monday.