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WC: The P-C Industry's Quiet Crisis?

WC: The P-C Industry's Quiet Crisis? Show me a line of insurance that managed to lop 15 points off its combined ratio in a single ...

By Robert P. Hartwig, Ph.D. | Updated on May 06, 2003

WC: The P-C Industry’s Quiet Crisis? Show me a line of insurance that managed to lop 15 points off its combined ratio in a single year, realized double-digit premium growth for the second consecutive year, chopped its underwriting losses by more than half and cut its reserve deficiency by a billion or two, and Ill show you a line that, remarkably, still has a lot of problems.

And so goes the never-ending saga of workers’ compensation insurance. From balance sheet black hole in the early 1990s to profit juggernaut just a few years later, the commercial property-casualty industrys biggest single line of coverage today finds itself stuck in profit purgatory. But how can this be?

Theres no question that moving from a calendar year combined ratio of 122 to an estimated 107 is a giant leap in the right direction, and that slicing underwriting losses from $6 billion to $2 billion is impressive. Twenty-plus percent premium growth is nothing to sneeze at, eitherbut is it enough? The answer is unequivocally no.

The fact of the matter is that workers’ comp suffers from seven major problems. These are: poor underwriting performance, softening pricing, weak investment returns, reserve inadequacy, rapidly rising medical costs, a slow-growth economy and massive terrorism exposure. Let’s tackle them one by one:

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