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WC Premium Increases Secret – Insurers Ignore Rating Bureaus


WC Premium Increases Source Not Rating Bureaus

The secret to WC premium increases has to do with investment risk.

The questions that I am asked the most in my line of work are twofold:

The second one is harder to assess than the first even though they are interrelated to a large degree.   The secret is that insurers base their premiums (hard vs. soft market) on what investment earnings they can obtain by investing a portion of your company’s hard-earned premium dollars.

The carriers can file rate deviations also known as Loss Cost Multipliers (LCM’s) at any point in time with the rate bureaus.  That is not true for assigned carriers that handle the assigned risk pool claims.  There are carriers presently that will deviate from the recommended rates up to 220%.  The carriers cannot deviate from reality – investment earnings.

Banks are the most conservative investors closely followed by insurance carriers.  Even though the market is rocketing along, there are not that many small company conservative stocks that are doing well over the long term (10+ year horizon).

Picture Of Cupped Hand Presenting WC Premium Increases Gold Coins

The Dow Jones index does not represent the full market or the proper portion of the market.     The Dow has changed the companies in the index to have more appealing and profitable companies – the flavor of the week, so to speak.

If you use Yahoo Finance (freebies) and search for Russell 2000 and Russell 3000, you will see how the REAL market  is doing overall.   This will  give you an indication of how your WC premium will shape up over the next few years.

I question any Risk Manager’s decision that does use these or similar indices in their decisions.  The two indexes are basically a peek into the real world results for upcoming premium changes.   As we all know, insurance premiums, including WC, are based on a lagging system of  2 – 3 years.

If you ever look at a 10K (found on the  free Edgar System)  of an insurance carrier, you may be shocked at how much funds they have in investments.  What are the carriers that had invested in risky investments doing today?   They are no longer in business.

You now know the secret.  I will send you the bill next week – kidding.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management 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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