Sequestration – Any Effect on Workers Comp?

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Workers Comp Sequestration 

The Sequestration  has made the rounds in the press as almost a doomsday scenario.  Is there going to be any lasting effect on Workers Comp if the imaginary fiscal cliff is reached?

Workers Comp Insurance Sequestration Graphic
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Workers Compensation insurance profitability has centered on long term investment returns by the insurance carriers.  As long term investment has suffered, the losses on Workers Comp have been diluted by writing a “full package” of  coverage.  Insurance carriers can then take the “WC hit” by not underwriting Workers Comp as a standalone policy.

Companion Insurance is a perfect example of very conservative underwriting.  Companion decided a few years ago to stop writing Workers Comp as a standalone product.  Best Insurance Ratings gave them an A (Excellent) with a stable outlook two weeks ago.    The strategy seems to have worked on at least a medium-term basis.

Silver Shield Sequestration With Umbrella Icon
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Most insurance carriers have followed Companion’s example of not attempting to be profitable by writing just Workers Comp coverage.  Most carriers are losing approximately 10 cents for every dollar  underwritten in WC.

The sequestration is a short term problem at its worst.  Workers Comp is a delayed system where the true profitability/loss on a policy is not seen for up to four years in the future.   The sequestration will likely just be a radar blip when examined from that far into the future.   If the sequestration was a planned series of events, then the insurance markets would show an effect.

The one area of concern may be if a policyholder is renewing their Workers Compensation policy during the next few weeks.   As the sequestration is a short-term malady, the insurance and financial markets may show a moderate amount of stress for the next month.

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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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