NCCI Reports Comp Insurers' Premium Plunges 23% In 3 years

ORLANDO,FLA.--Workers' compensation insurers have seen net written premium dive 23 percent from 2007 to 2009, the chief executive of the National Council on Compensation Insurance told a conference here.

Stephen Klingel, NCCI Holdings CEO, said workers' comp written premiums have been disproportionately affected by the economic downturn's impact on construction and manufacturing sectors.

Speaking at NCCI's Annual Issues Symposium held here, Mr. Klingel said wages that go into premium calculations for workers' comp were down 4 percent from 2007 to 2009.

One reason for the premium slump, he noted, is that the construction and manufacturing businesses impact workers' comp premiums the most of any sector, and with those two areas hit particularly hard by the recession, insurers are feeling a more acute impact.

Dennis Mealy, NCCI chief actuary, added that smaller firms in general, which normally buy full workers comp coverage, have been impacted more than larger firms, which tend to self insure to some degree, further pressuring net written premiums.

For the period of 2008-2009, Mr. Mealy said workers' comp net written premium declined 11.8 percent.

Net written premium for the total property & casualty industry was down 3.7 percent, Mr. Mealy said. P&c net written premium has now declined for the third straight year--the longest decline since the Great Depression, Mr. Mealy noted.

All commercial lines saw net written premium decline, with workers' comp dropping more than all lines except fire & allied lines, which fell 14.5 percent, NCCI reported.

Personal auto and homeowners were notable exceptions, with net written premium rising 1.2 percent and 1.3 percent respectively.

The combined ratio for workers' comp private carriers was 110 in 2009, the worst combined ratio since 2003, which was also 110, Mr. Mealy told the conference.

Investment returns of 11.8 percent for workers' comp private carriers in 2009 represented a 2.1 percent increase compared to 2008, but is still below the 14.8 percent industry average from 1990-2008, said Mr. Mealy.

On the positive side for workers' comp insurers, Mr. Mealy said the industry remains well capitalized to meet its obligations.

Claim frequency has also continued to decline, Mr. Mealy noted. Frequency dropped 4 percent in 2009, he said, following drops of 3.4 percent and 3 percent the last two years. From 1991-2008, Mr. Mealy said claim frequency has seen a cumulative change of minus-54.7 percent.

Residual market shares also continued to decline for NCCI Plan states plus Delaware, Indiana, Massachusetts, Michigan, New Jersey and North Carolina, Mr. Mealy said. He said 5 percent of direct written premium was in the residual market in those states in 2009, down from 6 percent in 2008. That number has declined since 2004, when 13 percent of direct written premium was in the residual market.