So, is it a hard market for Workers Comp?
It’s a question I’ve been pondering for a while now, and especially working on our recent webinar, . It seems you can’t avoid the topic of the hardening market but it’s really quite hard to ascertain when and if it truly has hardened. Leading up to the webinar, I spoke with our industry experts, gathered insight from our customers, and scoured industry publications to get the lowdown – but it turns out that the answer is “it depends”. Nailing it down seems to be difficult; however, most agree that, whether it is or isn’t fully hardened, Workers Comp (and Commercial Property) is leading the pack toward a hard market.
Given the divided response in the media, we couldn’t pass up the opportunity to query our recent webinar audience of insurers. Interestingly, not unlike in the media, there was a difference of opinion. Polling a group of Workers Comp professionals, we found that only 19% believe the market to be hard, while 69% are starting to see signs of a hardening, leaving the remaining 12% believing things still need to change to bring about a true hard market.
As an insurance solution provider, we’re constantly examining not only the market conditions but how these conditions affect our customers’ needs and product use. What we’ve consistently found is that insurers will have variable risk appetites and that underwriting guidelines and pricing will need to be flexible and responsive to market changes. Adjustable underwriting rules and the ability to scale to respond to market changes and volume increases will be paramount. Commercial lines carriers focus on differentiation through outstanding service and relationship building, but that paradigm will shift to be more intensively focused on price – the emphasis to be competitive and capture the best price for the best business. Our research has shown that insurers have a constant requirement for robust underwriting management systems in both hard and soft markets. However, what does change is the emphasis, the manner in which insurers use the same underwriting system they used in a soft market to optimize for a hardening market.
With the primary focus on speed and volume, emphasis should be placed on:
- Tracking exposure and monitoring against established levels to ensure appropriate referral rules are in place to kick in as necessary.
- Empowering underwriters with visibility (at their fingertips) to where and how the business is being written and how it is impacting not only their individual book but also the overall company performance.
- Collaboration in real-time, facilitating proposal options, inviting conversation rather than trading emails back and forth or the headache of multiple proposals.
Amidst the din of mixed opinion and varying estimations of where the market currently stands [soft, hard or getting there], it is clear that behaviors are shifting. 60% of our webinar participants responded that their organizations have done something differently in response to the hardening market. Recent headlines also support the winds of change thinking and shifting of behaviors; NCCI methodology for premium calculations, Workers’ Comp State Fund Market Beginning to See Some Hardening, and ‘Firming’ the Consensus Word Among Commercial Lines Executives. For certain, change is upon us. I look forward to helping influence and facilitating the industry’s ability to respond to the opportunity this change will bring.
Marquis Q. Simon
REISNER: It puts more pressure on underwriting. You would expect, or logic might lead you to believe, that pricing should be improving or hardening. That’s not the case. Eventually those underwriting results are going to show, certainly as loss reserve releases dwindle. Without investment yields, ROEs are going to be a challenge to keep in the double-digit range. Right now we’re seeing ROEs in the low double digits. It’s going to be hard to stay in that zone. Investors perhaps will have to get comfortable with something a little lower.
February 11, 2013 at 12:39 pm
Kimberly Tambo
Thank you for reading the blog and sharing your thoughts and perspective, it’s really appreciated and I value hearing what people think. From your remarks it sounds as if you are still feeling the pressures of the soft market environment. From our research and conversations within the industry we have received a mixed bag of responses. It often seems the response is based on geography or line of business. I invite you to keep me posted if you see things change. As well I invite other readers to share their experience.
February 14, 2013 at 2:46 pm