Nearly every insurance broker has been heard saying that workers’ compensation insurance rates are going up. But what does that statement really mean?
Although this is type of statement is true in the current market place, most brokers have little or no understanding as to why the rates are increasing; especially as the Workers Compensation Insurance Rating Bureau (WCIRB) has not approved blanket rate increases since 2009.
The issue behind rate increases, specifically in California is primarily two-fold.
First, those in charge of the regulatory body that governs and strongly influences rates (CA Department of Insurance) are elected officials and due to the officials’ desires for reelection, they typically frown upon rate increases that may not be viewed positively by the insurance buying public.
Second, insurance rates have been underpriced for quite some time. Although the WCIRB has not made blanket rate increase recommendations, it has noted, on multiple occasions, that premium rates in the workers’ compensation market are materially underpriced and, if left unaddressed, will most likely lead to a hardening of the workers’ compensation market.
When the insurance market hardens, the result for insurance customers is fewer companies to choose from and higher insurance premiums will be charged.
The last hard market led to what was considered sweeping workers’ compensation insurance reform in California, which in hindsight has had mixed success and odds are that if the market hardens again our elected officials will begin re-inventing the wheel to try to once again “fix” the issues they can point to as the problems with the workers compensation market.
Many insurance companies have taken a proactive approach to increasing rates in an effort to stave off a massive rate increase once the WCIRB recommends rate increases (which will inevitably happen). It seems that notifications are sent to brokers on a near daily basis regarding individual carriers increasing rates. An example would be what was received just this morning regarding yet another carrier increasing rates by an average 14.85% for accounts renewing September 15th and later.
This is not complete negative news as there are a number of ways for insurance customers to be proactive in their workers’ compensation program to help them to become virtually immune to the rate increases. GDI Insurance has had great success in increasing the desirability of its clients when it comes to insurance companies wanting to compete for their business.
If you are interested in increasing the level of interest insurance companies have in crediting your policy (reducing your rates), contact GDI Insurance Agency, Inc. today.
Matthew Davis MBA, AAI