Insight, analysis & opinion from Joe Paduda

< Back to Home

Mar
13

WCRI – Shuford on how the economy drives work comp

NCCI’s Dr Harry Shuford gave a great brief talk on the economy’s impact on the financial performance of WC.

A few key takeaways.

  1. WC is a relatively small part of the overall property and casualty insurance industry (around 11% or so)
  2. Average operating gain of WC has been about 5% over the last 20 years. That factors in an average return on investment of 14% and the underwriting results.
  3. WC premium dropped 23% from 2007 – 2009, then grew 18% from 2010 to 2012.
  4. Markets for all P&C lines seem to go thru cycles in synch.  That is, when the personal auto market is soft, so is WC, etc. Harry’s inference – poor investment returns are key to understanding when cycles occur, and, perhaps more significantly, help us understand overall business cycles as high investment returns APPEAR to predict recessions.
  5. Cost drivers include:
  • Long term structural decline in frequency  – this is global and not limited to the US.
  • The ebb and flow of inexperienced workers drives frequency as part of the business cycle – temps get added, frequency goes up.
  • Medical severity is a huge driver – utilization, price, and intensity of services.

 


Joe Paduda is the principal of Health Strategy Associates

SUBSCRIBE BY EMAIL

SEARCH THIS SITE

A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.

 

DISCLAIMER

© Joe Paduda 2024. We encourage links to any material on this page. Fair use excerpts of material written by Joe Paduda may be used with attribution to Joe Paduda, Managed Care Matters.

Note: Some material on this page may be excerpted from other sources. In such cases, copyright is retained by the respective authors of those sources.

ARCHIVES

Archives