Top 10 Challenge Areas – The First Five
The article on the Top 10 Challenges for Workers Compensation received a large amount of inter-buzz.
Two readers suggested an expansion (better explanation) of my list. I will split the Top 10 into two articles.
The first five of My Top 10 areas of challenge are:
- Harder market – without investment returns, WC cannot sustain lowering price pressures
- Captives/Alternative Insurance – every company wants out of the current WC system
- States that have legalized marijuana – now what does that do for the workplace?
- Employers need to monitor next year’s premium
- Affordable Care Act- the elephant in the room for any healthcare discussion
Harder Market vs. Hard Market
I rarely disagree with NCCI. However, a few weeks ago, the published an article on the underwriting cycle that I did not agree with overall. Investment returns besides a minuscule rate of rate on interest bearing accounts drive the insurance markets. To NCCI’s credit, the current situation with a low rate of return (interest) is not enough to sustain a market. The stock markets have been doing very well. Other than bonds, carriers can produce a great rate of return on premium dollars invested in the stock market in the long term.
If the stock markets take a hard downturn and the interest rates stay low deflation would rule the day. Carriers have nowhere to go for a decent rate of return. They will have to look to their policyholders which would equate to a hard market.
Captives/Alternate Insurance
As companies grow, there now seems to be a large push to examine other methods to find WC coverage such as captives, PEO‘s, and small/large deductibles. Alternative insuring arrangements does carry a large risk especially if a company is going to retain a large amount of the premiums. The alternative market must be examined with caution.
States That Have Legalized Marijuana
Two recent New Mexico court decisions have shined a bright light on the problem of marijuana in the workplace. California issued a similar decision a few years ago. If marijuana is prescribed medication by a physician, will it be considered the same as any employee that happens to be taking a prescription while on-the-job? Will an employee file a “drug discrimination” grievance in that instance?
Employers Overpaying Premiums At Policy Inception
There are many articles in this blog concerning the level of payroll decreasing for certain employers. If your company has a 20% reduction in workforce, why would you pay the same premium base as last year?
As I have written so much on this subject, I will refer to this article (click on the heading) on how the changes in healthcare will affect WC.
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