What Does NCCI’s 2011 Workers Compensation Issues Report Mean to Brokers and Their Clients?

confused contractor

As a work comp agent, you undoubtedly have an intuitive feel for how business size and industry are factors affecting your clients and prospects in the economic recovery. But also consider the hard data and how it can guide your own business strategy.

Earlier this month, NCCI released its 2011 Workers Compensation Issues Report, a 12 part, 50 page document that addresses a wide range of topics affecting the industry today.

The report is available in its entirety in two formats:

  • pdf download (one file per report part)
  • or a “virtual book” format which has some really cool features – but which I found awkward to use, primarily because of challenges with the zoom function, which I tried in two browsers. However, this may have just been pilot error!

The report is extensive, covering overall market topics such as economic conditions and recovery, legislative impacts, and claims studies. So how does it relate to those of you who are selling and servicing work comp accounts?

First of all, the report says that while the P&C industry is generally starting to look more favorable, the signals specifically regarding workers compensation are mixed. I’ve no doubt most of you can easily confirm that! While the report may support much of what you intuitively know, I think it does provide some hard data that I’ve translated into some key questions to ask yourself as you look for opportunities with your own book of business.

Are your clients and contacts still in business?

Yes, this sounds like a big “duh” question, but I ask it because of this trend included in the NCCI report: After business bankruptcies tripled between 2006 and 2009, the rate of bankruptcies appears to be have dropped significantly in 2010 (based on 3rd quarter data). Of course when a business goes bankrupt, that’s an entire book of business that’s lost – not just to another broker, but to the entire industry.  While the bankruptcy rate might be viewed as news that’s more not-negative than truly positive, here’s another hopeful statistic: While the job creation rate is slow, it is currently a positive trend, nationally, which leads me to the question:

Are your clients and prospects beginning to hire again?

Some states are still worse off than others, but overall, payrolls are recovering. The rate of business startups is at a 15 year high. Admittedly, many of these startups are coming from otherwise jobless entrepreneurs who may not be hiring employees and needing workers comp insurance soon.

I think all of these factors combined suggest that it’s time for agents to be touching base with former clients and contacts and keeping an eye on this part of the recovery picture. It also wouldn’t be a bad idea to think about specific markets that may be experiencing a higher rate of entrepreneurship or recovery, as suggested in this CNN article.

For more on payroll trends and other factors concerning the recovery, read the NCCI issues article The Road to Recovery: The Workers Compensation Insurance Industry in the Aftermath of the Great Recession by Robert P. Hartwig, PhD, CPCU.

We all know it can be hard to get psyched for a conversation you think may be negative. But your outreach to those who have been most affected by the recession will pay off in the long run. With that in mind:

Are you especially checking in with your smaller clients and prospects? 

It’s no secret that the recession has been harder on small businesses than large ones, with small businesses laying off proportionately more employees. Since small businesses, which have fewer self-insurance options, actually buy more full-coverage workers compensation policies, this has also produced a premium decline NCCI estimates at 4-6% over the last two years. (Precarious Market Outlook Prevails by Stephen J. Klingel, CPCU)

Are you especially keeping tabs on clients and prospects in manufacturing or contracting?

More than 40% of workers comp premiums come from manufacturing and contracting, although these sectors employ only about 20% of all workers. Particularly hard-hit by the recession, these industries alone account for a 4%–6% decline in workers compensation premiums, NCCI estimates.  (Precarious Market Outlook Prevails by Stephen J. Klingel)

“Strong rebound” unlikely

Unfortunately, as Klingel says,  a “strong rebound” in workers comp is unlikely. I think that means you’re going to work as hard as ever for new and renewing business, but there are indicators that the balance of 2011 and 2012 will bring a steady, if slow, increase in opportunities.

Are these helpful ideas? How are you looking to sustain and grow your work comp business in today’s economic climate?

As always, we love to see your comments here on the blog, or you’re welcome to email me personally at kory.wells@zywave.com.

– Kory Wells, WorkCompEdge Blog Editor

© 2011 Zywave, Inc.  All rights reserved. For reprint permission, contact the blog editor.

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