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| Here's the lowdown on property, general liability, worker's compensation, directors and officers liability, and political risk. |
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CFO.com Staff,
CFO.com | US
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| January 22, 2002 |
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Search by line of insurance:
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Workers' Compensation
Pricing
End of 2001 saw considerable acceleration in price increases for workers’ compensation insurance. As in other lines, the attacks of September 11 had drastic impact on corporate workers’ comp insurance costs... Rates now set to increase by 20 percent to 40 percent this year... Carriers still considering how to factor in potential for catastrophic losses — losses like those seen in terrorist attacks... Second big rate driver is rapid increase in medical inflation. Medical costs expected to rise more than 11 percent in 2002. Guess what? Workers’ comp carriers expected to pass those costs on to corporate insurance buyers... Another factor: Earlier gains from tighter controls and loss reduction programs have been exhausted... Broker Marsh says companies with highest loss/exposure experience will be hardest hit.
Deductibles/Coinsurance and Limits
Many companies going with higher deductibles and more self-insurance. Some also looking into captive programs. Such programs largely abandoned when the market for workers’ comp insurance softened in the 1990s. Under captive programs, companies take much of the risk themselves, then contract to cover only major losses, commonly those of over $500,000 or $1 million.
Availability
After almost 10 years of competition among carriers on price — a competition which benefited purchasers — pendulum is clearly swinging other way. Many carriers have exited the workers’ comp arena. Terrorist attacks have created a new threshold of risk that could create second wave of departures... While fewer worker's comp carriers than five years ago, Marsh says plenty of high-quality options available to companies... A more troubling trend: Reinsurance marketplace for workers' comp has all but dried up, leaving carriers with less protection — just when risks are increasing... Market's seen substantial drop in number of companies able to buy guaranteed-cost programs. Carriers still offering such coverage — for which added premium can't be charged because of bad loss experience — but cost to companies is often prohibitive... Here too, buyers taking on more of risk by going to coverage priced on loss-sensitive basis. Translation? Final premium charged based on insured's losses.
Underwriting Trends
No longer willing to just go out and buy market share, workers' comp underwriters now focusing more on risks they're assuming. That means taking harder look at companies with high losses, and asking more often for more detail about company's amounts and types of workplace injuries, as well as safety record and loss-prevention programs... Also likely terrorist attacks will have insurers moving previously low-risk jobs — such as postal workers — into higher-risk categories.
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