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Workers’ Compensation Outlook in 2001
by Frank Krisanits, Diversified Risk Insurance Brokers
Since the Workers’ Compensation Industry in California was deregulated in 1994, competition for your Workers’ Compensation insurance dollar increased at a pace never before seen in our State. Rates for virtually every classification saw double-digit decreases. The overall effect was to reduce the total California Workers’ compensation premium level from $11,000,000,000 to approximately $7,000,000,000 today.
At the same time competition was increasing, cost for the things the workers’ compensation premium dollar paid for — notably medical treatments, attorney fees, etc. continued to increase. For 2001 medical costs alone are expected to increase over 13%.
In October 2000, the San Francisco based Workers’ Compensation Insurance Rating Bureau announced that California’s Workers’ Compensation Insurer faced a combined ratio (losses plus expenses) in excess of 150% for the 1999 calendar year. Essentially, this means that for every $1.00 in workers’ compensation premium collected by an insurance company, the company paid out $1.50 "+" in losses and expenses.
Obviously, you cannot run a business (or a household) very long by exceeding income by over 50%. Yet some insurance companies tried. And as a result have been seized by the Department of Insurance, have withdrawn from writing business in California or are no longer in business themselves.
With that as background, we want to advise you that we expect Workers’ Compensation rates on our Client’s business to increase this year. A National survey of insurance companies conducted by Hartford Connecticut based Conning and Company found that that 1/3 of them expected to raise rates by 20%. California’s rates are likely to face greater increases. We cannot predict to what degree your rates will be affected. Your rate(s) will result from variables unique to your business. We did want to bring you up-to-date on the state of Workers’ Compensation Insurance in California and to let you know we have access to virtually every credible workers’ compensation insurance carrier doing business in our State.
This means that we have the ability to work effectively on your behalf to minimize rate impact.
Now, what can we both do? Diversified can work with you to put emphasis on your Company’s loss control, employee safety, and return-to-work programs. Carriers will look to these as strong indicators of your Companies ability and willingness to partner with them, through us, to control your exposures and reduce risk. That will translate to the best rates.
And, remember to call us when you plan operational changes – we have the experience to help you control your costs.
last updated: February 14, 2001
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Diversified Risk Insurance Brokers
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