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Workers compensation premiums

Although the firm Market Scout contends that the workers compensation market is not softening, critics question their data, objectivity, timing, and conclusions. Market Scout provides quotes for property and casualty lines, including workers comp, to agents and brokers. For those not immersed in the arcane world of insurance, a “softening market” is one where prices are dropping and coverage expanding as carriers seek to build market share, often at the expense of sound underwriting (risk selection) principles.
Evidently, one of the carriers that they use most often is the primary source of their data. At the least, this calls into question Market Scout’s conclusions; one carrier does not a market make.
There are two other potential concerns with Market Scout’s information and conclusions.
1. their data tends to lag the industry, and there are some indications that rates have begun to soften significantly since June 1.
2. other market watchers are seeing a definite, and larger, drop in WC rates than Market Scout indicates.
My sense is the market is indeed softening more rapidly than Market Scout indicates.
What does this mean for you?
If you are in the WC industry, you can either follow the numbers-challenged off the cliff or tell senior management pricing is about to cross the “stupid line”. If you choose the latter, document document document.
If you work in or provide services to a WC payer, be prepared for them to request price cuts, reductions in work force, and other means to reduce admin expense. When prices are dropping, most payers just look to cut internal expenses instead of focusing on lowering claims expense.

Joe Paduda is the principal of Health Strategy Associates



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.



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