NCCI's CEO, Stephen Klingel, opened up yesterday's Annual Issues Symposium (AIS) by describing the state of of the work comp market as "deteriorating."
That's not what I, and 724 of my colleagues (record attendance) wanted to hear, but it was sobering nevertheless.
The question is - is "deteriorating" worse than last year's "precarious". The balance of the downside and upside as explained by the presenters at the AIS indicated to me that the situation is not dire as the adjective used would have one believe.
First off, while written premiums are near an all time low relative to volume and inflation, the trend was explained as having slowed significantly, if not actually having bottomed out. This is great news for brokers whose compensation is commission based on premiums.
In addition while the combined ratio has climbed dramatically to 115, one has to remember that this number is essentially a cash flow number - thus the combined ratio is reflective of the fact that reduced premiums (due to reduced payrolls) is intersecting with long tail claim elements. Also the data is affected by premium refunds (aka "dividends") because audited payrolls were less than what premiums were based on.
Other positive news was that indemnity claims lowered, and medical costs, though still up, did not increase nearly as much as in the past. Perhaps some state's reforms are actually producing savings on the medical front.
Finally, while the unemployment numbers are still high, new jobs are being added trending towards increasing payroll.
Work comp typically lags the general economy by a couple of years due to the effects of employment. What was reported gives me optimism that we are on the road to overal economic recovery, albeit slowly, and that the industry is relatively healthy.
The positive news was that the industry remains well capitalized, with very healthy surplus (in other words there's plenty of money available to meet claim obligations).
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