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Oct 31

Workers’ Comp Results Deteriorated for Northeastern States Last Year

Most states in the northeastern region reported deteriorating workers’ compensation underwriting results last year, according to latest data from A.M. Best.

Pennsylvania, New Jersey, Delaware, Maine and Rhode Island were especially hard-hit.

Pennsylvania’s direct premiums written fell 8.6 percent last year. New Jersey’s fell 8.3 percent. Delaware’s was down by 8.1 percent. Maine fell 5.5 percent while Rhode Island was down 5.2 percent. The total U.S. direct premiums written fell by 5.4 percent last year.

New York, on the other hand, bucked the downward trend. The Empire State saw its direct premiums written volume increase last year. It went up by 5.8 percent to $3.62 billion.

Higher Loss Ratios

Eight states in this region (New York, New Jersey, Massachusetts, Connecticut, Maryland, Rhode Island, Vermont and Delaware) had higher direct incurred loss ratios last year compared to the previous year. New York(95.8 loss ratio in 2010), Maryland(91.3), Vermont(71.5) and Delaware(89.0) all reported loss ratio hikes of around 10 points or more.

Three northeastern states — Pennsylvania(69.7), Maine(61.5) and New Hampshire(68.4) — as well as the District of Columbia(52.4) had lower direct incurred loss ratios last year compared to the previous year. Both New Hampshire and D.C. saw their loss ratios fall by around 10 points.

The total U.S. workers’ comp loss ratio rose to 74.7 in 2010, up from 68.1 in 2009.

Loss ratios show how much of the premiums collected are going out to pay for actual losses. The higher the percentage, the less likely an insurer will be able to post a profit after other expenses are factored in.

A.M. Best said workers’ comp results deteriorated sharply in 2010. The U.S. calendar-year combined ratio rose nearly seven points to 118.1, up from 111.2 in 2009, and the highest level since 2000.

The ratings agency predicted the workers’ comp line’s underwriting performance will continue to weaken before it improves. That’s because several adverse conditions that led to the deterioration in recent years are expected to continue over the medium term.

These adverse factors include competitive pricing, rate decreases, high unemployment, decreased payrolls, rising medical costs and claims severity steadily trending upward.

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