At its annual conference in Orlando, the National Commission on Compensation Insurance (NCCI) recently presented an overview of the state of workers compensation insurance across the country . Dennis Mealy, NCCI’s chief actuary, presented to a standing-room only crowd, which is notable in itself, as the normal crowd for an actuary would fit in the proverbial phone booth.
Anyone with an interest in workers comp should take a peak at Mealy’s presentation. As is often the case, viewers will pull out different nuggets, depending upon their points of view. Here’s what jumped out at me:

• From 2008 to 2009 workers comp premiums dropped by 11.8%. No surprise, as premiums are tied to payrolls and the latter have tanked along with the economy. In addition, average premium rates have declined steadily since 2003, as no politician wants to approve a rate hike.
• Net written premium from 2007 to 2009 is down 23%.
• The payroll for manufacturing has been on a steady decline over the past two decades.
• The payrolls for manufacturing and contracting comprise 20% of comp payroll nationwide, but generate 40% of the premium. Again, no surprise, as the manual rates in these areas are higher then the rates in other occupations.
• Investment gain – the crucial money made off the float of premium dollars – dropped to 7.1% in 2008, after averaging nearly 15% in prior years.
• The combined ratio for workers comp is running around 110 – in other words, for every dollar insurers collect in premium, they are spending $1.10.
• Insurers continue to offer premium discounts in order to secure new business or retain existing business (what my colleague Tom Lynch refers to as “eating their young”).
• Frequency of injuries continues to trend downward.
• The average cost of indemnity per lost-time claim and the average medical cost per claim continue to rise.

There you have it: premium dollars are down, investment returns are down, and losses are up. These days it’s not easy making money in workers comp. On the other hand, the economy seems to be recovering; the prospect of virtually universal health coverage could well have a positive impact on comp; and despite all the problems, residual markets remain small.
As is usually the case, insurers are betting that they can beat the odds of a tough market: by writing only the best businesses, by preventing injuries through loss control, by managing claims aggressively and by investing prudently.
There’s Always Tomorrow
What you see from the bridge depends upon what you are looking for: where the despairing see reasons for jumping, the optimist simply enjoys the view. The risk transfer business requires optimism (for everyone, that is, except the actuaries). The great insurance wager never really changes: carriers are betting that premium dollars collected will ultimately exceed what they have to pay out in losses. The negative results of the last few years are viewed as an aberation. Just wait ’til Tomorrow:
The sun’ll come out
Tomorrow
So ya gotta hang on
‘Til tomorrow
Come what may
Tomorrow! Tomorrow!
I love ya Tomorrow!
You’re always
A day
A way!
For insurers, that “tomorrow” hopefully includes more favorable rates, improved return on investment, employers truly committed to safer workplaces, employees who really pay attention, and, while we’re making a wish list, selfless attorneys. You gotta love tomorrow!