Nasty Fiscal Cliff – Will Workers Comp Fall Off It?
Will Workers Comp be affected if we all fall off that nasty fiscal cliff ? I think we first need to define what exactly is the fiscal cliff. According to the article from the link:
“The now infamous phrase was coined by Federal Reserve Chairman Ben Bernanke in February 2012, during one of his required appearances before Congress on the state of the U.S. economy. He described … “a massive fiscal cliff of large spending cuts and tax increases” on Jan. 1, 2013. “
If one looks through the automatic cuts and tax increases that will hit on New Year’s Day, the insurance markets will be affected in the short-term only, if at all. As I pointed out in a recent post, Workers Comp has been stable through most of these so-called financial crises.
The hardening and softening of the insurance markets, especially Workers Compensation has had very little to do with the economy. The very basic definition of the hard market is when there are not enough suppliers (insurance carriers) to meet the demand by business for coverage.
The hardening or softening of the market has not followed any type of trend or financial forecast lately. Did the market immediately harden after the 2008 – 2009 financial crisis? It did not even blink. I thought the market would harden over the past three years. It has not whatsoever.
In my opinion, the supply by Workers Comp insurers may have shrunk over the last few years. The contraction was met with a definite shrinkage in employer numbers, or at least the payrolls and number of employees have been greatly reduced recently.
Workers Comp is still a very stable industry when compared to others. According to an Insurance Information Institute article from November, “In September 2012 property/casualty (P/C) carrier employment slipped by 300 vs. August.”
There are 528,000 P/C employees in total. The one month drop equals .005% of the industry. The positive news is the P/C employees actually gained 1,600 jobs since September 2011.
I will cover more on this subject next time.
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