To see the article in BusinessInsurance, click here or if you can't see the full article, google "Workers compensation audit reviews can reveal costly errors."

Here are some important highlights for brokers regarding premiums from the 2012 NCCI symposium:

Despite investment returns not generating sufficient operating returns, the premium growth is a positive sign of an improving economy and that the industry remains well capitalized for the years ahead.

Residual markets in the first quarter of 2012 saw a 47% premium growth. This is not positive, according to NCCI President Stephen Klingel, because the major growth was seen in the premium sector, exceeding $100,000 in premium. As residuals grow there is tendency that they become less self-sustaining, and it becomes difficult to maintain pricing differentials to meet the growht in risk inherent in a growing residual market.  

Another interesting and somewhat perplexing point is the fact that there has been a 3% increase in claim frequency despite the lagging economy. The logic has always been that claim frequency is tied to the employment rate.  In this economy with high unemployment, the question remains as to why claim frequency has gone up. 

NCCI states that premium growth was much higher in 2010 than originally projected due to the fact that when carriers collected their workers compensation audit premiums for the 2010 year, payrolls increased significantly. 

Net written premiums increased by 7.4% in 2011 compared to 2010, which is great news for brokers.

The combined ratio for private carriers in 2010 and 2011 was the same at 115, the highest since 2001.  Workers compensation combined ratio remains the highest of all major commercial insurance lines for the third straight year.  

The bottom line is that workers comp is on the upswing and will continue to thrive but brokers will start to find insurance carriers being more selective about the accounts they are willing to write.  Brokers must take action to lower their clients’ premiums and offer them a better underwriting profile to enter the more competitive marketplace with.   

A recent survey leads The Council of Insurance Agents & Brokers to declare that the commercial property and casualty market has hardened.

“We’ve been cautious up to now about declaring a market turn, but I think it’s reasonable to say that the market has made a hard turn after two quarters of price increases and tighter underwriting,” says Ken A. Crerar, president and chief executive officer of The Council, in a statement. “It’s difficult to predict length and severity, but the market has turned.”

Source: The Council of Insurance Agents & Brokers. Chart prepared by Barclays Capital Equity Research.

The survey goes on to point out how workers' compensation pricing has increased in some cases up to 10%.  Yesterday we pointed out that marketscout reported that the average rate increase for April was 3%, but workers comp was an exception being up 4%.  

  "Workers’ compensation toughened as carriers raised prices or rejected the business. Sixty-eight percent of brokers responding said workers’ compensation prices increased 1 percent to 10 percent in the first quarter of the year. A broker in the Southeast commented, “Workers’ compensation was up with any kind of losses or up just a little even with no losses. Certain classes were not being accepted like they were.” A broker in the Northwest said, “Workers’ compensation increased in pricing or many carriers are non-renewing accounts."

As I keep pointing out to everyone, 2013 is going to be a workers' comp moment, as we watch major rate increases combined with the new New York and NCCI mod split point.  Keep in mind that the 2013 mod uses the claims experience from 2011,2010,2009.  So the only way to reduce the 2013 mod is by recovering past overcharges. By doing so, your clients will not only see an immediate mod reduction but will also benifit from future mod reductions. 

Mod Reductions = Fastest way to be competitive in a rapidly changing market place! & the only marketing tool with no up-front cost but big WOW results…   

MarketScout, the Dallas-based electronic insurance exchange, reported the largest rate increase in April was for workers’ compensation at 4%, while general liability rates rose 3%. This seems to be in line with the ongoing trend. It would be hard to see rates not increasing when insurance companies are reporting no investment income, as well as loss ratios well over 100%. All this combined, with the upcoming NCCI new split mod formula starting in 2013, will mean a great increase in premiums for larger employers with debit mods. If you are a workers’ comp broker with clients who fit the profile, I suggest you don’t wait. We have about 7 months left until the big 1/1/13 renewal date and if the quotes come in astronomical, your clients will be shopping around for better quotes. The 2013 experience mod is using the 2011, 2010, and 2009 claims experience, which won’t be affected by implementing any quick safety or any other program that you might implement now for this renewal. The 2014 experience mod uses the 2012, 2011, and 2010 claims experience, the majority of which have already occurred and will not be affected by newly-implemented safety programs. The same can be said about the 2015 experience mod, which uses the 2013, 2012, and 2011 claims experience. But you can knock down the experience mods now, which will have an immediate effect on premium reductions and will give your client a better underwriting profile to enter the new marketplace with. 

The NCCI released its Workers Compensation Issues Report May 3, 2012, outlining the challenges that the Workers Compensation market continues to face. What particularly stands out in the report is the increase in injury claims frequency in 2010 for the first time in 13 years. After adjusting the data for certain distortions, which initially showed that frequency in injury claims increased by 13%, the NCCI in this report reveals that the actual increase was 3%. Although this rate increase is not as great as initially thought, it’s still of major concern. According to the report, the NCCI will be “watching the frequency situation closely to determine whether the increase is a one- or two-year occurrence (as happened in the early 1980s) or a more permanent and disturbing trend.”

Other challenges to the Workers Comp market include the outcome healthcare reform, which is now in the hands of the Supreme Court, will have on the workers compensation system; the Dodd-Frank Act which could impact regulation over the insurance industry with the newly formed Federal Insurance Office; state gubernatorial elections that will focus on the economy and most likely not be addressing any major Workers Comp reform initiatives; and of course the general health of our economy and whether we’ll be seeing more premiums being generated in the Workers Comp market because of increased wages, a rise in jobs and payroll. Since late 2011, we’ve already been seeing modest rate increase across many coverage lines, with Workers Comp (along with Property) in the lead.

More than 900 insurance carriers and nearly 40 states use NCCI as their licensed rating and statistical organization and look to the organization for information and trends regarding the Workers Comp market. At Apex Services, we have broker partners in each of the 40 NCCI states, helping them with our workers compensation premium recovery service to drive premiums down and recoup past erroneous charges in the face of the challenges that the market faces. This is especially critical now for brokers in obtaining new business and retaining renewal business with premiums increasing as a result of years of a deteriorating market for carriers and the state funds. What’s more, if the data in claims frequency continues to show an upward trend, more industries and the business within these sectors will experience a significant rise in premiums. Apex Services can provide immediate, tangible results to your business clients, in addition to your efforts in assisting clients with safety, compliance, return-to-work programs, and other services.

Conning Research and Consulting says in its “Workers’ Compensation: A Bumpy Road from Recession to Recovery” that with the current investment environment working against workers’ compensation insurers, companies may be pressured into a harder market as they try to achieve underwriting profits in a line that has not had a combined ratio under 100 since 2006.

One point that I would like to stress in the article is that "New York is still suffering from rate inadequacies despite approving a 9.1 percent increase in October 2011 and a 7.7 percent increase the year before."  If this is true that assessments and rates are inadequate in New York and will continue to need to be increased, I think that New York will become the first hard market. As I mentioned in a previous blog entitled "Workers’ Compensation Assessments In New York Are Highest In Nation," the biggest problem as the market hardens in New York is the State Insurance Fund's continued advantage of being able to charge lower surcharges over private carriers.

In addition to all this, brokers and carriers need to keep in mind that come 2013, New York and NCCI have both adopted a higher experience modification split point, which will continue to rise over several years and will also include an inflation factor. Therefore, employers with poor experience will see their experience mods worsen drastically.  So you have a hard market, plus worse experience mods, which equals big increase in premiums, even though payroll is nowhere back to where it used to be. This means clients that do not normally shop around will start shopping their insurance to various brokers, trying to keep their head above water and stay in business. A broker can cement his or her relationship with clients as long as the client sees that the broker is going above and beyond to keep the client afloat amid increasing insurance rates.

Offer value-added services and you will maintain current clients and win new business.

See full article from PropertyCasualty360 here.

Earlier this month when MarketScout released its commercial insurance rates for March, Workers Compensation, along with Property, led the market with increases. Workers Comp rates increased by 4%, continuing the trend upward since late last year. National brokerage Willis confirms the rising rates, stating that about 90% of insureds are seeing rate increases on renewal, particularly in the Northeast (especially New York and New Jersey) and California. The brokerage expects rates to range from up by 2.5% to up by 7.5%.

Furthermore, in a recent 2012 P&C Workers Compensation & Safety Survey, cost containment is by far the number-one Workers Compensation insurance concern of employers for the next 12 months. Employers are also concerned about increasing exposures, renewals, and rising fraud behaviors.

As result of these increases, insurance agents are looking to help clients control costs, as all indications are that Comp rates will continue to rise as state funds keep asking for increases, and private carriers are looking to recover years of poor underwriting results and declining premiums with rate hikes. Part of the solution, of course, is an agency’s risk management division offering analysis of client data to flag high-cost claims in advance and help put programs in place to deal with these injuries, in addition to assisting a client in fostering a safety culture and implementing employee return to work programs.

However, many insurance agents want to give their clients results that are more immediate and tangible so they can retain customers as their renewals are coming up, and gain new clients, through premium savings. Many find a win-win solution with APEX Services and its Workers Compensation Premium Recovery program. APEX provides agencies with the ability to go in and tell customers that through a detailed analysis and audit of their Workers Comp program, they can save them money because of carrier errors and overcharges in current and past policies. What’s more, the client doesn’t have to pay for the audit, and the agents don’t have to do any of the work. In fact, APEX will conduct the audit on a contingency basis, receiving 50% of the monies recovered with the customer getting the other 50%. A 20% commission from APEX’s fee is paid to the agent/broker who offered the service.

“We recover premium dollars for 90% of the Workers Comp accounts we audit,” says Simon Feuer, president of APEX Services, “due to the many errors that can occur with a client’s policy.”

Simon explains that over the years state and federal changes have been implemented and the insurers typically don’t go back and retroactively adjust policy rates to reflect those changes. “A client and broker may be doing everything right with data analysis, claims management, risk management, and safety program implementation, but there are errors in premiums that go back ten years or so,” says Simon. “We analyze everything to pinpoint where there have been overcharges and correct these mistakes.”

In fact, APEX has been so successful since opening its doors in 1994 that it has recovered more than $48 million in Workers Compensation premium overcharges for more than 3,000 customers. Clients span many industries, including healthcare, manufacturing, transportation, construction, non-profits, and food, among many others.

Examples of Apex’s success in vetting out errors and correcting experience mod factors include: A construction company with a paid premium of $950,00 that received a refund of $423,167 because of payroll omissions at the Comp Board and claims reserves revisions; a healthcare chain whose premiums since 1994 have ranged between $1-2 million received return premiums totaling over $510,000; and a manufacturer received return premiums totaling $236,120 based on paying premiums between $200,000-$300,000 since 1996.

In today’s economic landscape, strict regulatory environment, and increased expenditures including in the area of Workers Comp, making it more challenging for companies across all sectors to thrive and grow, APEX provides agencies with a service that can serve to differentiate themselves in an increasingly tough insurance market. For more information about APEX, you can contact Simon at 888.380.2739 or e-mail him at simon@apexservices.com. You can also visit: http://www.apexservices.com/.

Check out the article featured in ProgramBusiness here.

According to Business Insurance, rising prices and improving economic conditions buoyed the collective fortunes of the largest publicly traded insurance brokers during 2011.

The article goes on to say that “Better prices hit brokers pretty quickly because, unlike insurance companies, (brokers) don't earn their commissions over time.”

All this is great news for brokers who are able to win new nice-size accounts and reap the immediate benefits of higher commissions!

The question is, what immediate value can a broker offer to sign up new clients and to keep current clients?  A value-service that offers fast results with a bang!  Wow your current and prospective clients with some type of refunds, where they get cash back returns with no out-of-pocket expenses and you will certainly win.

You can read the full article in Business Insurance here.

NCCI has requested a 6.4% increase in average loss costs in a filing with the Rhode Island Department of Business Regulation (DBR). NCCI requested that this increase be effective June 1, 2012

NCCI said Rhode Island lost time claims frequency remains the highest among Northeastern states, while claims severity remains the lowest in the region.

Time for brokers to increase value to their clients as premiums start to rise and clients start to shop.

DBR is soliciting written comments on the loss costs filing, comments are due by next Monday.

See notice of Solicitation of public comment from DBR here.

Brokers take note…  According to a recent analysis released by MarketScout, workers comp experienced the greatest increase in rates in the month of February, compared to other lines of insurance.  The 3% rise is in keeping with the consistent rise in premiums since the end of last year. 

Brokers must evaluate price vs. profit, meaning that if it’s all about price, you will lose the business. But if it’s all about profit and you are adding real value, you win the business. 

What value have you shown your clients lately? 

See article by Business Insurance here.