Monthly Newsletter

We have been sending a great deal of information about workers' compensation insurance in recent editions of The Alandale Advisor.  What does all this news mean to you, the person paying the premiums?  We hope this article can remove any confusion and give a clear picture of what to expect from insurance carriers in the near future.

Terrorism's Effect
As National Underwriter put it, "a crisis looms in the commercial insurance market unless Congress enacts a federal backstop for terrorism losses."  Since January 1, 2002, terrorist acts have been excluded in reinsurance agreements says Warren Heck, chairman of Greater New York Mutual Insurance Company.  In addition to increasing rates, primary insurers have been forced to either non-renew policies or limit primary coverage amounts.  Carriers cannot exclude terrorism from workers' compensation coverage, so some insurers simply cannot afford to provide that coverage.

Rate Hikes
Unfortunately for Californians, we are getting hit with workers' compensation rate hikes from two sides.  As we have reported several times, the attacks of September 11 will result in higher workers' compensation rates.  One reason for this is that reinsurance carriers may be forced raise their rates as much as 6,000 percent according to National Underwriter.  There is no provision in workers' comp rates for catastrophic losses.  The rates primary carriers have to pay for reinsurance are, of course, absorbed by you, the final consumer of insurance products.  Standard & Poor's expects rates on workers' compensation insurance to rise as much as 50% nationwide.  The good news according to The Wall Street Journal is that since workers' compensation is tightly regulated by most states, the rate increases S&P anticipates would come over time.

The second reason for California's anticipated rate hikes is the Workers' Comp Benefit Increase bill recently signed by Governor Gray Davis.  (see related article)  Insurance company groups warn that sharp benefit increases in the workers' compensation reform package far outweigh potential cost savings.  Nicole Mahrt, director of public affairs from the American Insurance Association, says, "California's economy will pay the price.  It will take three or four years to realize any cost savings in these bills." 

Coverage May be Harder to Obtain
Insurers may elect to stop offering workers' compensation coverage to large companies.  Prior to September 11, most insurance companies were not concerned about large groups of employees in single locations.  It has now been said that one insurance carrier will not insure any company that has more than 50 employees at any one location in New York City.  This expectation comes at a time when coverage is already difficult to find.