Workmen’s Compensation is influenced by several factors – some broad (macro: i.e. at the state legislation) and others are very granular (micro: specific to a particular company).
Macro factors include:
State Legislatures – Those ladies and gentlemen in your state capitol impact your work comp premium costs. For example, the state of Florida passed Senate Bill 50A in 2003. In turn, the Florida workers comp rates dropped from the highest to among the lowest in the Unites States a few years later. Consequently, the Florida work comp rates decreased by about 68%!
Looking ahead to the 2020s, we anticipate several states proposing a variety of changes to their individual work comp insurance systems that may have a net positive or negative impact on workers compensation rates, compliance, class codes, etc.
Medical Services – The good and the bad.
Good = New treatments, medicines, etc that help our society. These advancements result in offsets which decrease lost time accidents and reduce indemnity costs tied with work comp claims
Bad = Cutting-edge medical services can be pricey. Those increasing costs are addressed by the work comp system which have a downstream impact on insurance carriers and ultimately, policyholders’ work comp premiums are increased. .
Competition – Competition lowers prices in a marketplace. Competition and market share often drive premiums for carriers who find themselves in an aggressive mood. When an insurance company wants to grow their market share not much will get in their way. Sometimes this is good for an employer and sometimes not! What you typically find is that the long tail costs associated with workers comp claims (this is where it can sometimes take years for a single claim to catch up and mature in claim value) will catch up those carriers who may be artificially under priced with the notion of securing market share.