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| Safety & Workers' Compensation |
| Workers' Compensation Costs Expected to Surge This Year |
Just when you thought you could indulge in a labored sigh of relief at having squeaked by for another fiscal quarter, word about increases in this year’s workers compensation premiums is hitting the newsstands and cutting your celebration short.
80% of businesses will need to renew their workers compensation policies this year, and analysts are predicting that most businesses face a 25% increase in premiums.
Business owners are understandably concerned. Why are the increases so substantial, and if the increases are justified, what event is responsible for the jump in prices?
Meghan Parry, marketing specialist for The Workers Comp Fund (WCF), a Workers Compensation carrier, points out that there are at least five elements that are driving the price increases. Natural adjustments in the laws of supply and demand have affected prices, but a slow economy, increases in health care costs, and repercussions of the September 11th disaster have combined in a “triple whammy” that has left the workers compensation industry reeling.
Although premium prices have been dropping statewide over the past several years, claims frequency and severity have steadily increased. WCF saw an 11% increase in the year 2002 alone. Analysts predict that this trend will continue, and carriers have adjusted their premiums in order to compensate. Because health care costs continue to climb (an average of 30% over the past three years), the cost to provide care when a worker is injured has jumped as well.
The sluggish economy has also affected the industry. More carriers are becoming insolvent, and reduced investment returns have negatively impacted financial stability. Re-insurance rates (the cost of insuring a company against a catastrophic loss) have increased in record increments as well, due partly to the “trickle-down” effect of the September 11th attacks. Insurance analysts are predicting that total losses from the September 11th disaster will amount to almost $100 billion. Workers compensation losses are slated to add up to 6 billion alone. Although the disaster affected very few Utah workers directly, workers compensation providers nationwide will see increases in the premiums their insurance providers charge as the market tries to adjust to these astronomical losses.
If there is a bright spot in the workers compensation scenario, analysts remind us that even though rates are up, they have not yet reached the same levels they were at during the “high water mark” year, 1994. Additionally, carriers are quick to remind us that workers have enjoyed some of the lowest workers compensation rates in the nation.
(Source: Workers Comp Fund)
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