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Workers Comp Markets Affected By Upcoming Election Cycle

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Workers Comp Markets – Hard or Soft May Not Matter

My brother asked me this question.   Will the upcoming election affect the Workers Comp markets?  He is a day trader of sorts.

I Voted Sticker Affect The Workers Comp Markets
Public Use License – Public Domain

Writing articles for over 15 years means that I have covered this topic in the past.   My opinion has not changed over the years on the Workers Comp markets.

Investment Trends Affect The Workers Comp Markets

Carriers were making a 15% return on every Workers Compensation dollar written.   This figure came from NCCI, so I consider it trustworthy.  The pre-pandemic Combined Ratio was 85%.

Insurance carriers did not have to rely on investment returns for profit.   The Workers Comp press published many articles recently on the market hardening due to COVID-19.  I agree with that assessment.

Premium vs. Profitability

If insurance carriers can make profits by investing in solid and speculative investments, then the need for premium increases subside over time.

If carriers cannot generate profit off investments, then the market will harden quickly.  Where does any carrier have to look for funds if their investments do not perform well?   The two areas are:

  • Premium increases
  • Becoming more conservative in underwriting insureds (hardening)
  • A combination of the first two.

Carriers also have investment/financial advisory arms that I am not considering when I cover profitability.

Strange Times Defy Investment Trends

Workers Comp markets - Russell 2000
Please click to see a clearer image – Courtesy Yahoo Finance

The economy may be sputtering presently.  The stock markets are extremely healthy (for now).    What does this mean for future investments?

This screenshot from Yahoo Finance shows the Russell 2000 Stock Index over the last two years.  If you click on the above thumbnail. you can see the chart much more clearly.    The Russell 2000 more closely represents the stock market than most of the other indices.

The market plunged in March 2020 but has recovered most of the losses.  Investment profits are back in play for now.

We also cannot forget China’s effect on the overall investment markets.   China still owns a large amount of US Federal Securities.

From this article on MSN/Quartz 

Beijing could use its stockpile of US Treasury bonds to destabilize the US economy and pressure Washington into backing down.

COVID-19’s Effect on Workers Comp Markets

The long-term effect will not be known for quite some time.   Three weeks ago, I published an article on how the delayed effects of COVID-19 may not be realized until mid-2021.

The workers comp system is a delayed system.  Only approximately 5% of the data has been reported to the rating bureaus.   Most of the Coronavirus’s effects on Workers Comp will not be known until the end of 2021 or after.

Check out my article from two weeks ago for the particulars of how Worker’s Comp data will be delayed.

Bottom Line – Election Cycle and The Workers Comp Markets

When I write the bottom line sections I usually prognosticate an opinion.  This subject remains a tough one to call.  Will Worker Comp benefit from a Republican or Democratic win in the Presidency, House, or Senate?

The Workers Comp markets, by nature, are localized as each state (good or bad) influences the markets.

The House and Senate races will likely have an effect on each state’s local Workers Comp laws and rules.  The Presidential Election may have a minimal effect – that being whether investors remain comfortable in the investment markets.

I apologize as I do not have a definitive answer on this one.  In 2020, too many other influences have come into play that may affect the Workers Comp markets.

 

 

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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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