Today’s workers compensation market is much different than the market three to five years ago. Most companies are enjoying the benefits of a competitive, soft market. Competition among workers compensation carriers has increased, underwriting appetites have expanded, and rates on average have decreased.

Unfortunately, this has not always been the case. When the hard market hit years ago, many small to medium sized construction companies found it difficult to obtain competitive workers compensation insurance. Some were insured with carriers that went out of business shortly before or shortly after the hard market started. This made it difficult for these companies to obtain the documentation required by a new carrier looking at their business. In some of the cases where a carrier went out of business, claims results did not meet expectations as the claims were sent to other entities to be handled.

Other companies that faced challenges included those that had hopped from carrier to carrier several times during the soft market and found it difficult to obtain the documentation required by a new carrier looking at their business. Still some other companies found that their carrier tightened underwriting requirements during the hard market and would no longer write their industry class of business. While the prospect of reduced workers compensation rates is always appealing, companies should do their due diligence in researching a prospective carrier before changing to the other carrier. Here are a few things companies should consider and weigh in their decision making process:

• How long has the carrier been writing workers compensation for their industry and size of business? Many of the carriers writing workers compensation for the medium sized/small construction business sector were not writing this insurance three to five years ago.
• Has the carrier chosen to not write business for any period of time during the past 10 years for the company’s specific workers compensation class? If so, why?
• How long has the carrier been in business? A number of the carriers that were writing business for medium sized or small businesses 8 – 10 years ago are no longer in business.
• What is the financial rating of the carrier that is being considered?

Who knows when companies will have to face the challenges of the next hard market. Hopefully the next hard market is many years into the future. But even if the market doesn’t harden for years, those companies that follow the steps outlined in these blogs will improve their appeal and marketability with workers compensation carriers today and will have a leg up on those that haven’t prepared.

Justin Rowley is Vice President Risk Management at A Plus Benefits, Inc.

This entry was posted on Tuesday, May 29th, 2007 at 8:44 am and is filed under Human Resources, Risk Management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.