Boca Raton, FL – NCCI recently released a new Insights article on ratemaking challenges that are being faced in today’s “atypical” workers’ comp market, noting that one of the top of mind issues for insurance executives is Rate Adequacy, as covered in its Focus on 5 list for leaders in 2020.
At NCCI’s Annual Issues Symposium 2019, a video shown on the underwriting market cycle discussed the ebbs and flows of the workers compensation industry and how the market has changed since the 1990s.
Today’s workers compensation environment is healthy and competitive. However, industry stakeholders have described the current market as atypical, displaying a hybrid of both Soft-market and Hard-market characteristics.
Soft market typically refers to periods when coverage is widely available and insurance companies lower prices to actively compete for market share. During a soft market, industry reserve deficiencies may build as companies release reserves to offset increasing underwriting losses. On the other hand, hard market generally describes periods of relatively higher prices, tightening underwriting standards, and reserve strengthening.
Current Soft-market style conditions include:
- Insurance prices have generally decreased at renewal
- Competition has been high
- Coverage has been readily available
Current Hard-market style conditions include:
- Combined Ratios have improved
- Reserves have strengthened
Furthermore, NCCI’s estimate of the calendar year workers compensation combined ratio has been less than 90% for the most recent three years. The Calendar Year 2018 combined ratio of 83% is the lowest observed since the 1930s.
Read the full NCCI Insights brief: Ratemaking Challenges in Atypical Workers’ Compensation Environment