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CBO Predictions Mean Ouch For Workers Comp

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CBO Predictions Bad Sign For Work Comp

The CBO predictions mean a big ouch for WC.

The recent revision by the Congressional Budget  Office (CBO) in reference to future employment numbers is dire at best.  The CBO Charts are here.   Please note the file is a PDF file and not a webpage.The political ramifications will not be covered overall.   The data will be the only areas examined.

Rating of Labor Force Participation CBO Predictions Bad Sign
Wikimedia Commons – Rcragun

The CBO is basically the best source for the Federal Government’s budgetary figures.  As we all know that when the labor force declines dramatically, Workers Comp payrolls and premiums will decrease proportionally.

One has to look no further than the following chart in the title page of the report to immediately see the decline in labor force participation.  There is a valid argument that increases in wage can offset the decline.   However, the increase in wages will very likely not even approach the lost payrolls.

Insurance carriers are going to have to make up this ground somehow.  Most economic models say that when demand for a product decreases, the price for that same product will decrease.  This is not true for WC rates.

The pricing models in place for WC charges more for each dollar of coverage when the payroll is smaller.  This is due to the risk of an accident cannot be offset by the lower premiums paid by employers.  Insurance carriers are not trying to increase profits.   Smaller employers pay more per unit of WC coverage.   This is an insurance market norm.   Check here for a further analysis of a shrinking WC market.

This could possibly also cause the market to harden for WC though there are other variables that would need to change to cause this to happen by 2020.

Picture Thumbs Down at Decreasing Bar Chart CBO Predictions Bad Sign
StockUnlimited

Hopefully, the CBO may be over-projecting job losses in the coming years.  If not, then many companies may end up paying more premiums on a smaller profit margin.  There may be another market force in effect. which may offset some of the premium increases.  If the situation or the CBO’s forecast changes, I will then post another article on the situation.

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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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