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Time Bomb for Workers Compensation Markets – Tick, Tick, Tick

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Workers Comp Is A Time Bomb

A time bomb may go off soon in Workers Comp.  The post title has hit the Workers Comp airwaves after the President of Liberty Mutual had made it at a recent presentation. I often do not necessarily agree with Liberty Mutual. However, in this case, I think the assertion is highly accurate.

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 The combined ratio for the Workers Comp market is 119%.  The 119% is not the highest combined ratio in history.  That means that when a carrier writes Workers Comp coverage it is at a loss. I have often commented in my presentations that Workers Comp carriers were writing low premiums and taking huge losses as they could recover it in the stock and bond markets. Now, they must invest it in fixed investments. Does this sound like a hard market is approaching? 

A hard market is basically when carriers become very strict in their underwriting procedures. According to the old supply and demand model, if supply is cut and the demand is still strong, prices must increase to keep the market stable. If carriers become much more stringent, then employers with E-Mods of 1.2 and above will likely end up in risk pools/state funds which charge up to 400% more for the same coverage. 

 

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The telling statistic is as follows – according to the Wall Street Journal, John Doyle, the president and CEO of American International Group Inc.’s (AIG) U.S. property-casualty operations, said his unit had cut back on how much workers’ compensation coverage it sells. It now has annual premiums of about $800 million, compared with $3 billion in 2007.

 So the largest writer of Workers Comp is now highly concerned about a hard market and one of the major writers of Workers Comp just cut their writing by 74%……Tick Tick Tick.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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