"You're looking at all overall workers' comp premiums, but my premise is that we ought to take a look at some key industries when you're looking at the opportunities and the impacts of workers' comp," he noted.

Mr. Benoit advised his audience to focus on the construction industry and some key characteristics in order to react to opportunities and minimize risk.

"In marketing school, one of the key things we learn is segmentation," he said. "And one of the things we don't do enough of in the insurance industry is look at specific industries."

The construction industry, for example, comprises "10 percent of total businesses in the United States, but when you look at total premiums, because of the hazardous conditions within the industry, the construction industry actually represents 25 percent of total premiums throughout the United States," he explained.

The addition of manufacturing increases the total premium dollars represented to 35 percent, he noted.

One reason why results for the construction industry are so volatile is that the average policy is small, between $2,000 and $3,000, versus the average policy of about $17,000 for manufacturing.

"This means that the people in the construction industry don't have any deductibles," he said. "Therefore, they are in the primary market for insurance. They don't have alternative risk premiums, so the primary carriers have really borne most of the risk in this industry."

Though overall claim frequency is down, he said, in smaller construction companies with fewer than 10 employees, frequency is 2 percent higher. As you move higher up the scale, to larger construction firms, frequency declines to about half that of smaller construction firms, he said.

The key driver of workers' comp results in construction, he said, "is the economic volatility of this industry."

For example, within the past four years new jobs were created in the construction industry, while the manufacturing industry lost jobs.

He said 20 years ago when the construction industry had major swings it was buffered by the manufacturing industry, which diluted the impact of the construction industry on overall comp trends. "Now with employment down in the manufacturing industry, any major swings in the construction industry have a big impact," he said.

The rapid growth in the construction industry can be segmented by state, he said. States where construction is growing quickly will have a higher frequency of claims, he said.

To illustrate this, he pointed out that even though overall claim frequency is down, there are problems in California. One of the reasons is that the construction industry in the state represents more than 25 percent of total premiums.

"These are types of information you should look at," he said. "This can apply to any industry segment."

He also pointed out that when there are upswings in the economy, small firms are created. This trend implies some other impacts for workers' comp insurers to watch for:

? Small firms don't always have the right loss control

? A lot of employees don't have health insurance, therefore you can have a situation of Monday morning accidents with these firms.

? Often there is more overtime in these industries, and again this can cause problems.

? Often there is a reliance on inexperienced and younger, less educated workers.

Mr. Benoit said brokers looking to create programs should examine particular industries in which they can, for example, improve loss control. "They can design packages and products for these situations," he said.

Another factor is overtime statistics, he added. "You can look at overtime by state and those states will have more losses than states that don't have as much overtime."

"For example, in Indiana overtime is decreasing. So if I were creating workers' comp programs, I would certainly look at Indiana as a place to focus on," he said.

Mr. Benoit added that growth in the construction industry in workers' comp is localized. In Florida, for example, "you'll see marked differences in the construction industry within the state."

Florida overall has a projected growth rate of more than 6.5 percent in the construction industry. "So there is high opportunity, but with certain growth there is certain risk involved," he said.

Mr. Benoit took note of the difficulties that actuaries face when they must predict loss trends as much as five years ahead based on current information.

He likened their situation to that of an investor that invested in Enron before its collapse, where available information did not indicate its pending demise.