California Workers’ Comp Results Worse than National Average
A recent report from Fitch Ratings Service indicates that workers’ compensation results have continued to deteriorate across the entire country and California is fairing even worse than the national average. The combined ratio for California workers’ compensation business was estimated to be 125 percent for 2009—reflecting a 25 percent loss during the year for the industry. Although precise numbers are not yet available, the deterioration appears to have continued in 2010.
The national average for results show that the “combined ratio” for workers’ compensation in 2010 rose to 113.3 percent, up 7 percent from 2009. A combined ratio of 100 percent means that for every $1 in premium, a company is spending $1 in claims and expenses. The 113.3 percent ratio for 2010 indicates companies are spending 13.3 percent more than they are charging in premium.
When investment income rates are significant, insurance companies can make up for the excessive losses and expenses with income from investments. But since the economic downturn, investment returns have been weak and companies can’t make up this difference. This is leading to large negative returns.
The impact of several years of poor results is starting to affect the market. Few new companies have entered the California market in the last few years. Existing companies are giving fewer credits and discounts, renewal pricing is starting to harden and in some cases, companies are starting to impose rate increases in some work classifications. In order to secure the best “deal” for their workers’ compensation dollars, business owners should work closely with their insurance agency to make sure they see a number of insurance options for their workers’ compensation coverage.
Western Growers Insurance Services offers an experienced workers’ compensation team and works with a large variety of workers’ compensation providers. To learn more about how you can maximize your workers’ compensation program, please contact us.