Higher losses drive shift in workers comp market

According to leading experts, buyers are seeing workers compensation rate increases in the middle single digits, and medical costs continue to account for the bulk of loss costs, making the workers comp market competitive but slightly unstable. While some businesses with good loss experience may see a small reduction or nominal price increase, underwriters are tightening their guidelines to reduce losses. There has been a slight withdrawal of insurers willing to go after new guaranteed-cost accounts in the market. Instead, those insurers are leaning toward retrospective or experience rating plans where the buyer could be responsible for some of the loss costs. Workers comp premiums dropped 14.5% to $12.3 billion in 2009 vs. 2008, which rating agency A.M. Best Co. Inc. said is the lowest in the past decade. At the same time, workers comp insurers' combined ratio rose to 120%.