ORLANDO, Fla.–The depressed economy has good news and bad newsfor workers' compensation insurers, the chief executive officer ofthe National Council on Compensation Insurance said today at thegroup's annual seminar here.

The good word is there will be fewer and less costly injuries,but the bad news is there will be fewer premiums written, saidSteve Klingel, NCCI president and CEO.

Mr. Klingel, basing his remarks on data from previousrecessions, said insurers' premiums will be affected by smallerpayrolls with less workers to insure. The greatest impact will befelt by insurers whose business comes from the more affectedsectors of the economy.

The hardest hit sectors, he said, will be the manufacturing andconstruction sectors. Mr. Klingel said that as construction slows,comp insurers will see less hurt workers from an industry thatgenerally tallies more severe and costly injuries.

There will also be a drop in injury frequency caused by the factthat fewer inexperienced workers will be arriving on the job, saidMr. Klingel.

In addition to the economy, he said workers' comp insurers willcontinue to be challenged by rising treatment costs for injuredworkers. The main cost driver of medical, said Mr. Klingel, is thesoaring amount of additional services or utilization. He said thesecosts from medical providers increased when action was taken toimplement restrictions on fees.

The fee schedules NCCI has found that work best to restrictcosts are those that are closest to Medicare, he said. Bututilization “needs work” and is a main cost driver of the compsystem, he said.

To get utilization costs in hand, Mr. Klingel said comp insurersare looking at pay-for-performance arrangements based on outcomesand patient satisfaction.

The NCCI executive said that in order to help state comp systemsget a better handle on treatment costs for injured workers, NCCIhas embarked on a new medical data call to gather information. Hesaid the effort is a multiyear, highly detailed process.