Workers
comp market moderates |
Pricing has moderated for workers
compensation policies that renew at midyear, helping to end a trend that saw
employers offsetting rising costs by raising their retentions. |
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Offsetting price hikes by
increasing retentions became a popular strategy over the past two years, as
prices rose significantly. The move toward higher deductibles continued for
policies that renewed in January. |
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But that has changed for
policies renewing at midyear. With a slowing in the rise of insurer loss costs,
rate increases have also slowed and deductibles generally are remaining
unchanged. And employers are reporting no trouble finding coverage. |
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''The marketplace is starting
to moderate in that regard,'' said Tim Brady, managing director in New York for
Marsh Inc.'s U.S. casualty practice. ''Customers don't have to automatically
assume much larger retentions in exchange for getting a moderating price
increase. That differs from where we were at the first part of the year, when,
to get a moderate price increase, potentially, you also increased your deductible.'' |
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Others agree, although they
stress that many policies are now experience-rated, so rates can vary from
average pricing. |
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''In January, we were still
seeing increasing rates and larger retentions,'' said Marcia Hahn, senior vp
for Arthur J. Gallagher & Co. in Itasca, Ill. ''But now the market is
improving.'' |
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Ms. Hahn said she has seen
midyear renewal rates remain flat, with a few accounts even decreasing, though
not substantially so. A few insurers are engaged in price competition, putting
downward pressure on policy costs, she said, but overall, insurers are still
careful about their underwriting and pricing. Meanwhile, large, loss-sensitive
programs have fewer nationwide insurers to turn to, which counters much of the
price competition, Ms. Hahn added. |
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Some price competition exists
for large accounts with healthy retentions, good loss experience histories and
work forces that are not concentrated in a few areas, said Ken Riegler, senior
vp in New York for Ace Risk Management. |
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Yet insurers are not giving coverage
away, and they are underwriting each account on its own merits, Mr. Riegler
stressed. Overall, the market is reaching equilibrium. After price corrections
over the last two years or so, price is catching up with losses, he said. |
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On average, policies that renew
in July are seeing increases of 7% to 10%, Mr. Riegler said. Policies that
include coverage for employees working or travelling overseas-particularly the
Middle East-can expect to get more underwriting scrutiny and to pay more, he
added. |
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Mr. Brady describes the current
situation as ''a market with some inconsistencies to it.'' Rate increases will
vary, depending on individual insureds' loss histories and the rate increases
they might have experienced during past renewals, he added. |
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The midyear renewals he is
familiar with have seen increases that are flat to 15%, Mr. Brady said. |
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California, though, is bucking
that trend, with some employers seeing rate decreases. Because of reforms
adopted in April, some insurers and brokers say that, on average,
insureds have seen 10% decreases for July renewals (BI, June 7). |
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Nationwide, clients renewing in
January saw increases in the high single digits, added Mike Betlinski,
executive vp in Los Angeles for Aon Corp. In contrast, clients with midyear
renewals, on average, are seeing low single-digit increases, he said. |
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In April, Lee Wood,
human resources manager for The Pape Group in Eugene, Ore., wrangled a ''little
bit of a decrease'' in pricing, she said. To do so, Ms. Wood canceled separate
policies purchased from a variety of insurers in January for coverage in five
states. |
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She consolidated the coverage
under a contract obtained from Morristown, N.J.-based Crum & Forster Corp.
Though she had been looking at price increases, she said, her volume business
helped her win a price decrease. Ms. Wood said she also was helped because
overall rates dropped between January and April. |
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In the first quarter, insurers
were able to hold price increases, on average, to high single digits, said
Bryan Melas, senior vp of commercial markets administration for Liberty Mutual
Insurance Co. in Boston. |
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Still, that pricing allowed
insurers to earn a margin over loss costs, said Mr. Melas, who stressed that he
was describing the insurance industry and not just Liberty Mutual. |
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''The margins are not as large
above the loss cost trend as they were, say, in the last year or two, but we
still feel pretty well about them,'' Mr. Melas said. |
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A moderating of loss cost
trends has helped, he added. |
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According to the Boca Raton,
Fla.-based NCCI Holdings Inc., for example, the growth in workers compensation
medical costs appears to be decelerating. Average medical costs per claim
increased 9% during 2003, compared to rising 11% during 2004, an NCCI spokesman
said. |
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''It wouldn't be surprising that,
as loss trends start to mitigate somewhat, the need to increase the deductibles
is also tempered,'' added Mr. Melas, who declined to discuss July renewal
rates. |
''In general, I would say
deductibles are not rising at the same pace they have,'' he said.
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