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2018 Soft Market or Just Reactions To Changes In Mod Structure?


Is A 2018 Soft Market For Workers Comp Here or Is It Something Else?

A 2018 soft market began to show up in some of the data this year.  In fact, over the last week, I have been interviewed for articles on the current WC market conditions.

Interestingly enough, the carrier rates over the nation have fallen faster than the Rating Bureau advisory rates.   California has recently seen this effect.  In CA, the advisory rates from the WCIRB (Workers Comp Insurance Rating Bureau) are referred to as pure premium rates.

Is this a sign of a soft market or something else?

Pic of 2018 Soft Market coral peach komodo
Wikimedia License – Nick Hobgood

The soft market or at least a softer market may have nothing to do with the drop in carrier rates compared to the advisory rates.  Why?

Everything in workers compensation rating has an offsetting variable or variables.  With the artificial increase in Mods, the carriers’ underwriters saw a chance to make their respective carriers look wonderful as they decided to drop rates ahead of the curve.

The artificial increase in Mods was initiated in 2013 by NCCI – better known as increasing split points.  The split points between the primary loss in a claim and the excess loss changed dramatically.  From 2013 and forward the primary loss (think expensive part of claim) increased from $5,000 to $15,000.

The offsetting variables were because state rating bureaus and NCCI reduced their advisory rates as the increased Mods caused the premiums to increase overall.   Carriers’ combined ratios are now reaching over 100% which makes Workers Comp profitable again.

Recently, California’s WCIRB dramatically changed the Mod formula.  It is now based on the size of the respective employer.  In my humble opinion, the carriers saw they could be profitable while reducing rates as the Mod will increase the Mods enough to allow for sharper rate decreases than the WCIRB’s recommended rates.

I am basing my opinion on having seen small company Mods increase over the last few months with no increase in claim values.

One only has to look to all of the states decreasing their recommended rates – sometimes by over 10%.   Did safety and risk management fuel the lowering of rates?   I would hope so, but the results would not be so dramatic.

The picture above is the soft orange lion coral.   It looks like it is rigid, but is extremely soft.

The bottom line is that one has to think that there is some variable out there that is the offset to the sharply decreasing rates resembling a possible 2018 soft market condition.  Time will tell over the next three years to see the full effect.

Related: Workers Comp Soft Market – I Was Wrong On This One

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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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