If workers’ comp is so profitable, why is Liberty Mutual de-emphasizing the business?
Because contrary to what NPR and ProPublica have reported, comp is NOT very profitable. In fact, over the past decade or so, it’s barely a breakeven proposition.
Today’s Boston Globe reports that the former industry leader (and my former employer and consulting client) has significantly cut back its work comp exposure over the last few years,
- greatly ramping up personal lines and other business lines,
- reducing WC premiums by over a third,
- dropping to the 4th largest underwriter of WC,
- selling off WC subsidiary Summit Holdings, and
- paying Berkshire Hathaway $3 billion to take over a big chunk of its exposure for legacy WC and some environmental claims.
These moves have dramatically increased profitability; Liberty’s overall profits increased from $284 million in 2011 to $1.7 billion last year.
(thanks to CompToday’s TJ Allen for the tip)
Yes, the work comp insurer that dominated the industry for decades, consistently leading in market share, is moving away from the work comp business. The reason is simple, work comp just isn’t very profitable.
Or even moderately profitable.
“In 2013, insurers had their most profitable year in over a decade, bringing in a hefty 18 percent return.”
What utter bullshit. The reporters took a single NCCI graph way out of context, mislabeling the “finding” and grossly mischaracterizing the slide’s import.
I discussed this at length with NCCI’s Chief Actuary, Kathy Antonello; Ms Antonello was kind enough to send over the graph in question…I’m going to dig into that in detail tomorrow.
For now, ponder why the industry’s dominant player is slashing its work comp business if it’s so darn profitable.