As the economy recovers, workers' compensation may see different directional trends, leading to a complex mixture of improvement and further deterioration, according to a new study by Conning Research & Consulting.
The workers' compensation line of insurance saw its last year of underwriting profit in 2006," said Joshua Youdovin, analyst at Conning Research & Consulting. "The economic recovery and rate increases will boost premium, yet we expect that rising medical costs and increased utilization of drugs will re-introduce the specter of inflation in loss costs and reduce profitability even further. The line also has been particularly affected by falling investment yields, creating headwinds against overall profitability. Still, some early signs of a turn in key economic drivers may be appearing, and the effects of recovery may bring some new surprises in risks and opportunities in the line."
The Conning Research study, "Workers' Compensation: A Bumpy Road from Recession to Recovery" analyzes performance drivers, state differences, industry differences, insurer behavior and looks at how insurers can prepare for this time of intense change.
"Workers' compensation insurers face many challenges in the recovery from the recession, and these challenges are likely to vary by state and industry focus, among other factors," said Stephan Christiansen, director of research at Conning. "Future profitability will depend on how well the insurers can adapt to these changes and manage both the assets and liabilities on their balance sheets. Cooperation with people in the medical community, the injured workers, and employers is essential for controlling the rising tide of loss costs. Companies will compete in different ways, and at different rates of response to these changes. State governments and insurance departments also will need to lead the way, using lessons learned from successful state reforms in the past as the workers' compensation industry resets for the future."
"Workers' Compensation: A Bumpy Road from Recession to Recovery" is available for purchase from Conning Research & Consulting by calling (888) 707-1177 or by visiting the company's web site at www.conningresearch.com.
About Conning Research & Consulting
Conning Research & Consulting is a division of Conning, a provider of asset management and insurance industry research and consulting services to insurers. Conning Research & Consulting has published independent insurance industry research for 50 years, including market coverage of 30 segments of the industry in addition to industry forecasting and identification and analysis of major strategic issues. As a result of its wealth of experience and intimate knowledge of the insurance industry, Conning understands industry challenges and opportunities and provides in-depth analyses on a wide range of industry products and issues. Conning is headquartered in Hartford, CT.