Insurance Information Institute (I.I.I.) chief actuary James Lynch is on the road.
Spring is heavy conference season. I type this from an Orlando hotel room on May 14, after day one of the Annual Issues Symposium put on by the National Council on Compensation Insurance (NCCI). Ahead are trips to Colorado, Philadelphia and Atlanta, as well as two meetings close to home, in New York.
The NCCI conference is perhaps best known for president and chief executive officer Steve Klingel’s summary of the workers compensation line in a single word or phrase. This year: Calm now . . . but turbulence ahead. With premium up 4.6 percent and the combined ratio (98) at its lowest since 2006, workers comp results have been good, but outside pressures could make the ride bumpy.
One pressure is low interest rates. Years can pass from the time an insurer collects premium and injury claims get paid, and insurers in the meantime invest that premium, with the proceeds helping pay for claims and bolstering profits.
Interest rates have been so low for so long that the industry can’t rely on interest rates to deliver results anymore.
Another is the sharing economy. As Dr. Robert Hartwig, president of the I.I.I. and an economist, noted later that day, the smartphone has made it easy to summon people to do ad hoc jobs, with the best known being Uber’s ride-sharing battalion.
Those workers are independent contractors (though that has been challenged) and as such don’t get traditional benefits, including workers comp coverage. As the sharing economy grows, workers comp could shrink.
The third is a series of attacks on the basic principles of workers compensation. News reports suggest workers comp doesn’t compensate injuries equitably; lawsuits suggest the line has violated the Grand Bargain that gives up a big tort payoff in exchange for a steady flow of benefits; and a nascent movement would let employers opt out of the workers compensation system altogether.
But workers comp has survived a lot in the century since it took hold in the United States and seems well-equipped to handle the, well, turbulence.
“While I am confident that we will work our way through these challenges,” Klingel said, “it is important to be realistic about current conditions and to recognize that the current positive results may not last.”
The I.I.I. has more workers comp facts and statistics available here.