The insurance broker and risk adviser's report, U.S. Insurance Market Report 2010, Third Quarter Update: Insureds Net Benefits as Downward Rate Pressures Persist, notes that little has changed in the first nine months of 2010, and the trend will likely continue unless there are significant events in the macro environment.
"Rates have held steady within a range," said Jonathan Zaffino, U.S. global risk management casualty leader for Marsh. "We've certainly seen rate decreases at a pretty consistent pace."
Zaffino said there have been many factors at play. "An abundance of capacity, a very, very competitive market, and we haven't had any major industry disruptions."
Zaffino said conditions have been favorable for Marsh's buyers and clients.
The report cited a 2010 NCCI report that revealed the workers' comp market has experienced 23 consecutive quarters of rate decreases.
At this stage, "we have to ask how much further can we go in terms of rate decreases," Zaffino said.
For example, the report noted signs of rate hikes in large jurisdictions, especially California, New York, and Florida. The California Workers' Compensation Insurance Rating Bureau has proposed an overall 27.7 percent rate increase. "The proposal gives a window into the market's direction," the report said.
In New York, legislation affirmed increases to loss costs -- predominantly driven by recent reform measures and increases to wage replacement rates, resulting in a 7.7 percent increase to loss costs as of October. "Another indicator of the market's direction," the report said.
Zaffino said those could be a directional indicator to determine an underlying trend. "We put the different factors together. What's happening at the state level. What's happening among carriers. NCCI said frequency is declining, but severity is increasing," he said. "Pieces of the puzzle are causing us to say, are we perhaps at the bottom even though there's an abundance of capacity? We very well could be at or near the bottom."
The impact of national health care reform is also an area that will "bear monitoring as we enter 2011," the report said.
Read more at the WorkersComp Forum homepage.
December 6, 2010
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