To figure out why, workers’ comp experts first look under the hood to check out claim costs.
Claim costs, however, are not going up at an alarming rate. A high unemployment rate means lower risk exposure.
Medical costs are not increasing as much as in the past either. This is despite the opioid epidemic and that workers’ compensation insurers often pay more for the same procedures as health insurers.
But now there is another explanation for why workers’ compensation premiums are rising.
That is, insurers are seeing dismal returns on allowable investment instruments, making it harder for them to offset workers’ compensation costs. As a result, they need to charge higher premiums to remain solvent and profitable.
This is expected to continue as long as investments such as U.S. Treasury yields offer returns running very closely to the inflation rate and are not expected to improve anytime soon. Since insurers purchase long-term bonds, the current yield will hardly help insurers offset some of the costs of writing workers’ compensation insurance in the years ahead.
This is just part of the current workers’ compensation story. To learn more, check out my article, “Workers’ Compensation: Future Turbulence Ahead,” which is the cover story of the May/June issue of the Casualty Actuarial Society’s Actuarial Review magazine.
The article also explains how economic, political and underwriting trends are likely to shape workers’ compensation in the next few years. Think of the article as a workers’ compensation status report.
Enjoy! And, feel free to let me know what you think!
Be the first to know.
Just click the “follow” button
at the lower right corner of this page.