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Over the past year the major ratings agencies have expressed concern over challenges the Workers’ Compensation line has faced during the recession, as well as the continued pressures it faces in achieving long-term profitability. In its January briefing, Standard & Poor’s went so far as to describe Workers’ Comp profitability as “mission impossible.”  

Workers’ Comp statutory combined ratios have continued to increase since 2007 due to a confluence of such factors as a slow economic recovery, anemic premium growth, intense competition, rising medical costs, increasing loss severity, rate inadequacy and low long-term investment returns. With both the indemnity and medical-severity components continuing to rise, the cost of Workers’ Comp insurance remains a top concern of insurance carriers and the ratings agencies.

Despite a favorable trend toward reduced claim frequency since 1997, the National Council on Compensation Insurance (NCCI) indicated an uptick in frequency in 2010. This occurred as the economy began to recover and companies began to hire more workers. Furthermore, the Obama administration’s health-care reforms created new and unprecedented uncertainties associated with potential medical-loss cost-shifting to Workers’ Comp.

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