In the latest Gauging the Economy newsletter, NCCI examines the current state of the economy and the implications for workers compensation insurance.
Among the findings:
Employment Growth—Continued weakness in employment growth suggests that downward pressure on exposure and claim frequency will likely continue until the labor market is poised for full recovery.
Wage Growth—Continued slack in the labor market points to weak growth in weekly wages. This implies that the growth in indemnity severity (cost per claim) will also be limited, at least in the short run.
Medical Inflation—Despite fear of general price deflation by some economists, medical price increases are expected to remain relatively strong and will continue to keep an upward pressure on medical severity.
Interest Rates—Investment income will likely be constrained due to the continued Federal Reserve policy of keeping short-term interest rates at historically low levels as well as attempts to drive long-term interest rates down through its bond buying program.
The full report can be found here (PDF): Gauging the Economy Newsletter – January 2011