Why Would Workers Comp Insurance Carriers Leave A State?
For many years, since the workers comp insurance crisis o the 1990s, the workers comp markets in most states were stable enough for carriers to write coverage for employers. I am not referring to the workers comp insurance carriers that are part of each state’s assigned risk pool.
The assigned risk pool is a backstop for any state or type of insured that cannot find coverage in the regular voluntary market. Industries such as roofing, construction, employment agencies, and trucking have all used their state’s assigned risk pool to find WC coverage.
One of the concepts that I picked up at the 2023 NCCI Annual Issues Symposium is that workers comp insurance carriers have been much more selective in underwriting risks. Dr. Hartwell used the H word (hard markets) which I had thought had gone away with the Combined Ratios reducing below 90%.
Not A Hard Market, but no Market
Not to pick on California, but the early 1990s until the mid-2000s was a boom time for SCIF, which is the carrier of last resort. Almost all carriers had pulled out of the state due to the inability to underwrite the workplace risks. The same lack of workers comp insurance carriers would eventually spread nationwide into the mid-2000s or longer.
An example of adverse underwriting (pulling out of a state) recently happened in California. I came across this article over the weekend that said State Farm was pulling out of Property and Casualty by accepting no more applications for new business.
You can check out the article at this link.
State Farm General Insurance Company®, State Farm’s provider of homeowners insurance in California, will cease accepting new applications including all business and personal lines property and casualty insurance, effective May 27, 2023. This decision does not impact personal auto insurance. State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.
Why Would Workers Comp Insurance Carriers Cease Writing Coverage?
One of the reasons that a workers comp insurance carrier may pull out of a state is that complex predictive analytics have shown that the risk has/will become too great for premiums to cover the losses and expenses. Check out the last sentence in the above press release.