So, I haven’t been in this industry for long enough to know what things looked like the last time the P/C Industry was faced with market changing factors. However, I’d like to think that based on what we’re looking at now, that there’s no choice but for the market to change. At this year’s National Workers’ Compensation and Disability Expo, in the Keynote, Robert Hartwig of the Insurance Information Institute (III) shared a lot of information that brought a few things into focus for me. Especially for small businesses, that don’t have the horsepower to run their own Risk Management operations, and rely heavily on the service delivered to them by carriers in the voluntary market.
The story goes something like this: There’s three major factors that Robert sees as looming over the P/C marketplace (specifically comp). He refers to them as Megatrends, and trust me when I tell you, he’s got the data to back these claims:
•The Obesity Epidemic
•The Aging Workforce
•Distracted Driving/Equipment Operation
So, if you’re even with me at this point, you’re likely familiar with the first two factors, and perhaps not so much with the third. Nonetheless, they all point to increased utilization of a Medical Care System that is seeing costs rise at an alarming rate. Of course it varies by State, but here in NH (the WORST CPI state in the country), you should be very concerned about this. Especially if you’re a P/C carrier, and you’ve seen your profits disappear by over 96% over the past two years.
What other kinds of pressures will carriers in the market be faced with (I’ve already referred to increased medical utilization):
•Cost Shifting from Health Insurance to WC
•Reduced Investment Income
•Reduced Revenue (premiums are tied to payroll remember…)
And then there’s this piece: if you’re an employer, you may not even be aware that change is a-comin’. In general, you may not even be aware of the impact of the actions you take (or don’t take) on your WC Carrier. It’s interesting perhaps then, that there is a general lack of concern for how injuries are paid for, especially where premiums keep going down and down and down, and then down some more. This “Third Party Payer Syndrome” only amplifies the medical utilization problem mentioned earlier.
It’s no surprise that large organizations with a well defined corporate culture are doing whatever they can to take control of “the situation”, before it takes control of them. But for the rest of us (the vast majority of us), what will be a shock is when many of the carriers in the voluntary market can’t bear the burden of all of the factors that are looming for them. We’ll be looking at each other in the blast zone, and wondering where things went wrong. Sound familiar?
