Workers compensation buyers have benefited from increased competition in recent years, but some companies could find it difficult to secure coverage as early as 2017 if underwriting loss predictions are realized.
“Many clients didn’t necessarily feel the need to shop their business in 2015,” Boston-based vice president of Risk Strategies Co. Inc. Mike Vitulli said in an email. Overall, it was a good year for underwriting results, and “competition was fierce on new and existing business,” he added.
Despite posting an improved combined ratio of 95% in 2015, the workers comp line is likely to produce a higher combined ratio of 98% this year followed by underwriting losses in 2017 and beyond, Fitch Ratings Inc. said in a report released last week.
The global ratings company said “competitive pressures” will drive the “slimmer” underwriting results.
Steve Goldberg, Dallas-based chief risk and operating officer at AEU Holdings L.L.C. and president of TEE & GEE Group, said he wouldn’t be surprised to see an even higher combined ratio, perhaps between 102% and 105%, for 2016 since “there isn’t enough medical management to offset the rise in medical provider costs.”
Either way, underwriting losses could mean “a reduction in options for our clients,” Mr. Vitulli said, adding that some insurers will “avoid certain classes of business or states — or both.”
For example, he said, while technology firms likely won’t have trouble securing workers comp insurance, home health care companies in Massachusetts, where nurses frequently suffer musculoskeletal injuries, may have a harder time finding coverage.
The report also states that insurers like ICW Group Insurance Cos. and American Financial Group Inc. have experienced “extraordinary premium growth rates over the last five years,” which can “add considerable risk to an insurer’s underwriting profile, particularly in a longer tail business with a history of volatility.”
Calling the shift an “important trend,” Mr. Vitulli said there have been many cases in the last 25 years where insurers “jump in, take a beating and then jump — or stumble — out.”
It’s important to recognize whether “new entrants have the staffs to handle claims appropriately,” Mr. Vitulli said without referencing a specific insurance company. “Will they be able to manage claims and achieve positive outcomes for injured worker, the employer and the insurer” and assure “a stable, long-term approach? Or will they stumble after a few years with poor claims experience and, thus, poor financial and underwriting performance?”
On the other hand, Fitch said current market leaders Travelers Cos. Inc. and Hartford Financial Services Group Inc. have grown steadily, capturing 8.7% and 6.9% of market share, respectively.
Source: Business Insurance | Stephanie Goldberg