Workers’ Compensation Policy Review

 Summary of the Contents – September/October 2007

             Underwriting results for the workers’ compensation insurance industry improved for the fifth year in a row, as discussed in “Workers’ Compensation Insurance Industry Profitability Surges in 2006” by John Burton.  As discussed in the article, the overall operating ratio, which is the most comprehensive measure of underwriting results because it considers investment income, was 83.9 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, 94.5 in 2004, and 90.5 in 2005.

             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 2006, carriers made $16.10 of profit for every $100 in premium.

             “Workers’ Compensation Benefits: Frequencies and Amounts in 2003” 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.  Detailed data on incurred benefits are provided for 47 jurisdictions in 2003, and tables providing comparisons among those states relative to national averages are provided for six years.  The differences among jurisdictions are substantial:  for example, in 2003 four jurisdictions had permanent partial disability (PPD) cash benefits per 100,000 workers that were at least 50 percent above the national average and seven jurisdictions 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.