Economy Drives Work Comp Success – WCRI
A great presentation on how the Economy Drives the financial performance of WC.
Dr. Harry Shuford from NCCI – One of the best presentations so far at this conference. This was great data analyses. He should have been given longer than 30 minutes of time. An hour would have sufficed for his presentation.
Income statement approach
Workers Comp’s average profitability 5% over time. It is very cyclical.
109% combined ratio – underwriting loss of 9% per year
If insurers charged the NCCI recommended rates, they would cover costs. – I did not understand that concept as most of the carriers use LCM (Loss Cost Multipliers) of more than 100% which would generate a profit.
Cost drivers
- Heavy drop in manufacturing and private sector injuries (frequency)
- Business cycle – flow of inexperience workers (AIG study)
- Business cycle – duration increases in recession, decreases in better economic times.
- Better medical treatment
- The key is labor market function
Hard markets are always preceded by a heavy recession. Underwriting cycles match economic performance of investments.
Bottom line – Workers Comp overall has performed much better than most of the financial industries.
I agree with the above statement as the usual market growth rate is approximately 4% over time. Workers comp performs at 1% better level than other financial and insurance markets.
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