Stats Show Characteristics Of WC Survivors

While most of the workers' comp numbers arepretty gloomy, there remains a tremendous amount of diversity withregard to the success of individual companies.

For example, data from the National Council on CompensationInsurance show that many companies appear to be reporting resultsthat are at or above the projected cost of capital. And there arecompanies which, over a long period of time, seem to be capable ofreporting very substantial and acceptable returns on surplus.

For some, current prices may be sustainablemore or less indefinitely, exerting even greater competitivepressure on the weaker players.

The resulting differentiation is quite consistent whether onelooks at those companies with a significant workers' comp focus(that is, a greater than average proportion of premium derived fromworkers' comp) as compared to the rest of the p-c industry, orwhether one looks at one-year or five-year averages. Insurers fallvariously into the following broad categories:

25 percent of companies doing very well (returns above the costof capital).

25 percent of companies doing fairly well (positive returns nearthe cost of capital).

25 percent of companies doing fair (positive results below thecost of capital).

25 percent of companies doing poorly (returns below or slightlyabove breakeven).

Looking at the accompanying table, which shows some of theunderlying performance drivers or characteristics by quartile forworkers' comp insurers, the factors that seem to most differentiatethe top quartile group include:

Superior investment performance.

Superior underwriting outcomes.

Lower capital requirements arising from superior outcomes.

Better financial leverage and profitability than thecompetition.

Highly selective choices with regard to covered risks.

Consistently faster claims closure rates.

Lower frequency–attributable to better risk selection, betterloss control, or both.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, August 27, 2001.Copyright 2001 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.

Contact Webmaster