Workers’ Compensation Policy Review

 Summary of the Contents – September/October 2006

             Underwriting results for the workers’ compensation insurance industry improved for the fourth year in a row, as discussed in “Workers’ Compensation Insurance Industry Increases Profitability” by John Burton.  The overall operating ratio, which is the most comprehensive measure of underwriting results because it considers investment income, was 90.6 in 2005.  This is a sharp improvement from the overall operating ratio of 108.1 in 2001 and is also significantly better than the operating ratios of 98.1 in 2003 and 94.5 in 2004.

            When the overall operating ratio is greater than 100, carriers lose money even when investment income is considered.  In 2001, workers’ compensation carriers lost $8.10 for every $100 of premium.  Conversely, when the overall operating ratio is less than 100, the industry is profitable when investment income is considered.  In 2005, carriers made $9.40 of profit for every $100 in premium.

             “Workers’ Compensation Benefits: Frequencies and Amounts,” by Florence Blum and John Burton provides the latest information on the frequency, average benefits per claim, and total benefits per 100,000 workers for four types of cash benefits, for all cash benefits, and for medical benefits.  The incurred benefits data are for 47 jurisdictions in 2002. 

             Differences among jurisdictions are substantial:  for example, three jurisdictions – California, New York, and the Longshore and Harbor Workers Program -- had permanent partial disability (PPD) benefits per 100,000 workers that were at least 50 percent above the national average and five jurisdictions – Arkansas, the District of Columbia, Indiana, South Dakota, and Utah -- had PPD benefits that were at least 50 percent below the national average.

Information on the Workers’ Compensation Policy Review

             The Workers’ Compensation Policy Review is published six times a year.  Requests for a sample copy or for subscription information can be sent to WCPR, 56 Primrose Circle , Princeton , NJ 08540 -9416; by FAX to 732-274-0678; by e-mail to JBWCR@aol.com; or electronically by visiting the website: www.workerscompesources.com. The January/February 2006 issue (which provides examples of how state workers’ compensation programs can be compared) can be downloaded without charge from the website.