What's happening to your work comp costs, or do you know yet?
How Are You Taking Advantage of Improving Your Work Comp Plan Results While You can?
While I've written constantly about the coming rate increases and changes in the Work Comp market, I've found myself wondering when the insurers were going to follow suit based upon the loss development that's been developing within the work comp system since 2005.
The WCIRB of California recently released it's September 2011 summary of insurer experience. The report is available for free at https://wcirbonline.org/wcirb/resources/data_reports/pdf/093011_insurer_experience.pdf .
The statistics in the summary tell an interesting story. While the average claim (including medical and indemnity costs) is now at $65,000, the average rate is around $2.30 per 100 of covered payroll. When you contrast that with the average claim and rate in 2003 you'll note the #'s were $54,624 and $6.29 respectively.
What this indicates it that the rates insurers have collected is not nearly adequate enough to cover the losses that have developed within the system. Rates have been held at artificially low levels to appease those within the local California government .
It is apparent now, however that insurers are willing to let unprofitable workers compensation business go away unless they can charge the appropriate rate for the exposure. This means that most high ex mod business will face a significant increase in their pricing in 2012. In addition, if an insured has not learned how to control their ex mod, many insureds will likely face increases of 40-60% in their workers compensation expense for the 2012 policy term.
What strategies can you take today to protect yourself from future sticker shock?
- Begin working on your renewal 4-5 months prior to your policy's expiration date.
- Understand what your experience mod will be in the future 6 months prior to it's issuance by the WCIRB.
- Evaluate your broker's capabilities and how they are impacting your ex mod.
- Evaluate the compensation you pay your broker and whether or not they are incentivized to help you reduce your experience mod.
- Begin an active program to manage all outstanding claims that comprise your experience rating period. Meet or speak with your adjusters each quarter to review every claim in the experience rating period.
- Conduct a unit stat review with your insurer(s) 2 months prior to the date your Unit Statistical Reports are due to the WCIRB/NCCI.
- Conduct a complete RFP process to evaluate the experience level of your broker, the insurer, and all contacts that will affect future experience mod.
If an insured currently pays $1,000,000 for workers compensation and carries an experience mod of 200 percent, the same risk would pay $500,000 with an experience mod of 100 percent. Focusing on improving the ex mod, and not the current pricing will significantly increase cash flow once the ex mod has been controlled within 3-4 years it typically takes to do so.
You can control your experience mod and the costs you contribute towards financing your workers compensation losses. Proper education, training, and advice from qualified professionals can help. If we can assist you, feel free to call us at 661-332-0382, or reach out to me directly at firstname.lastname@example.org.