The U.S. workers’ compensation insurance market is in dire straits according to a new report from A.M. Best, an international rating agency. Agency analysts have been examining the effects of competition, rate decreases, economic turmoil and other factors throughout 2010 and have concluded that the market faces challenges times in the coming years. The report highlights the continuation of these trends for some time, but analysts note that the market may see modest growth for the first time since 2005 this year.
The problems facing the workers’ compensation sector mirror the troubles facing the insurance industry as a whole. Recent events, including natural disasters and a churning legislative landscape, have taken a toll on the industry as it attempts to adapt to a changing business world. Lingering economic problems have also contributed to the deteriorating underwriting results, analysts say.
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According to the report, premium volume for the sector has fallen more than 30% since 2005. As a result of this and other troubles befalling the market, ratings agencies have been dolling out more negative ratings than positive. A.M. Best is likely to continue the trend for the remainder of 2011, but notes that some positive ratings may come to the market the following year.
While the report does not issue recommendations on how the market can be improved, analysts speculate that a recovering economy would have positive implications for the workers’ compensation market.