After years of declining workers compensation rates, experts say the comp market is slowly starting to firm—though most say the languid economy is still holding prices relatively steady.
Renewal prices for most workers comp policies have stayed flat or increased less than 10% on average nationwide, said Pamela F. Ferrandino, casualty practice leader, placement for Willis North America in New York.
Cubic Corp. saw a nearly 2% increase in its rate when it renewed its workers comp policy this fall with Chicago-based CNA Financial Corp., said Dominic Zullo, director of risk management for the San Diego-based defense and transportation contractor.
Mr. Zullo noted that CNA and other insurers who provided quotes appeared less willing to budge on price, though Cubic initially expected an increase of 5% to 10%.
“I didn’t see the marketplace being as aggressive this year,” he said.
In California, some employers are seeing guaranteed rate increases of 16% to 25% when experience modification rates are factored in, said Jamie Knoop, senior vp of the construction services team for Lockton Cos. L.L.C. in Irvine, Calif. That’s after the state’s Department of Insurance approved a nearly 36% increase in its advisory pure premium rate for 2012.
About 10% of employers nationwide still are seeing year-over-year rate reductions, including global companies that can handle large self-insured retentions for their workers comp programs, said Ms. Ferrandino.
Though insurers largely have been able to push for higher rates on recent renewals, workers comp prices remain relatively soft, said Tom Fitzgerald, chief broking officer for commercial risk at Aon Risk Solutions in Chicago.
“Insurers are, in my opinion, walking that razor edge of trying to price to expected losses and make a profit,” Mr. Fitzgerald said.
Accident Fund Insurance Co. of America in Lansing, Mich., has seen rates increase 3% to 4% for recent comp renewals. Much of that has been driven by the insurer’s focus on customer segmentation, said Al Gileczek, the insurer’s vp of business development.
“It is a market that’s bottomed out and is showing some signs of tightening,” Mr. Gileczek said. “But by no means would I call it a hard market.”
David Sandler, New York-based president of general casualty and chief operating officer of Chartis Inc.’s commercial casualty unit, said the rate environment is driving insurers to offer more favorable terms for large-deductible policies than for guaranteed-rate policies.
Guaranteed workers comp policy prices for Chartis are up about 6% from last year, while large-deductible policy rates for the New York-based insurer are up between 3% to 5% for jumbo employers and 10% to 12% for smaller firms.