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Workers Comp Insurance Crisis – #1 Cause Called Bubble By Bankers

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Workers Comp Insurance Crisis Comes From Outside US – Or Does It?

The Workers Comp Insurance Crisis of the 1990’s seems so far away now.  The most notable factor comes from outside the US.   I have written often that China’s banking crisis could cause quite large rumblings in most of the domestic financial markets – including insurance.   Where would the crisis be the most devastating? 

picture of workers comp insurance crisis bubble
Public Use License – Brocken Inaglory

 

A recent Business Insider article even remarked that China’s own bankers call the current credit crisis there as a “bubble.”  China has followed the US by financing growth with pure debt – in other words – borrowing money to invest.    The volatility from China is twice as high as anywhere else in the world. 

Currently, any type of insurance-based crisis may seem like an occurrence that will not happen for many years.  The insurance carriers can invest the premiums into stocks which has made everyone including insurance companies a tidy sum over the last year.   

However, if China pulls their investments in the US back to China to cover the “banking bubble” the financial markets would feel more than just a ripple-effect.   The days of the 1990’s insurance crisis would return very quickly.  

After all, China holds a large amount of US debt instruments – basically the US borrows from China to run the Federal Government. 

Woman workers comp insurance crisis With Colleagues at the back
StockUnlimited

I am not implying that there is an upcoming workers comp insurance crisis in the near future.  Employers cannot just keep expecting low rates due to the investment returns by a certain carrier or group of carriers. 

The bottom line is to not be complacent in your insurance programs – even if self insured.   In other words, now is a great time to explore a Plan B coverage for your workers if your company could not find coverage in the general marketplace.    Company owners and risk managers lose much sleep when having to ingest the Assigned Risk Pool rates.  

As mentioned often in the articles on this website, if the insurance carriers decide to not write a certain business, companies with an E-Mod of .90 end up in the risk pools.  The rates can increase over 400% in just one year when being placed into the assigned risk pool. 

Hopefully, I can look back at this article and ask myself – was I being too paranoid and make a joke about the non-occurrence of a workers comp insurance crisis

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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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