Workers Comp Market – Hardening?
How Will The Economy Affect The Workers Comp Market? This is one of my most debated topics lately. The opinion that I have is not very popular. I do not believe that there are any internal dynamics to the market becoming soft or hard.
As I have said for many years, the stock market controls the insurance markets directly. When insurance carriers can make quick and good profits off the premium dollars, then the insurance carriers can become much more competitive on price. During the 1990’s, the stock market was volatile and climbing. If a Workers Comp carrier can discount a premium 10% and then invest the money and make a 20% profit, they are going to look to bring in a large volume of premiums quickly. This results in a soft market.
With the recent plunge in the stock market, I would expect a hard market. Insurance carriers will be investing money in interest-bearing accounts that are safe investments. Who can blame them? If the carriers can only invest the premiums in low-earning accounts, there will be no price competitiveness. This will result in a hard market.
There are other influences on the insurance market. One of them is the insurance companies faltering and going into receivership. With the failure of many banks in the near future, insurance companies are sure to follow. The smaller number of insurance companies will lower the competitiveness and harden the market even more.
Bottom Line – It may be best to prepare for the very limited availability of insurance coverages. If insurance carriers are going to cherry pick, make sure that your company is one of the nice cherries. There are many suggestions in this blog to help you in a time of a tight insurance market.
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