Workers Compensation: Opportunities and Challenges in a Weak Exposure Environment Workers...
-
Upload
roger-jefferson -
Category
Documents
-
view
218 -
download
0
Transcript of Workers Compensation: Opportunities and Challenges in a Weak Exposure Environment Workers...
Workers Compensation: Opportunities and Challenges in a
Weak Exposure EnvironmentWorkers Compensation Educational Conference
Orlando, FLAugust 22, 2011
Download at www.iii.org/presentations
Robert P. Hartwig, Ph.D., CPCU, President & EconomistInsurance Information Institute 110 William Street New York, NY 10038
Tel: 212.346.5520 Cell: 917.453.1885 [email protected] www.iii.org
3
Workers Compensation Exposure Summary
There Has Been Tremendous Erosion of Workers Comp
Exposure Over the Past Several Years
Workers Compensation Premium Continues Its Sharp DeclineNet Written Premium
$ Billions
Calendar Yearp Preliminary
Source: 1990–2009 Private Carriers, Best's Aggregates & Averages; 2010p, NCCI1996–2010p State Funds: AZ, CA, CO, HI, ID, KY, LA, MD, MO, MT, NM, OK, OR, RI, TX, UT Annual Statements
State Funds available for 1996 and subsequent
Workers Comp Rate Changes,2008:Q4 – 2011:Q2
Source: Council of Insurance Agents and Brokers; Information Institute.
-5.5%
-4.6%-4.0%
-4.6%
-3.7% -3.9%
-5.4%
-3.7%-3.4%
-1.6%
2.6%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4 11:Q1 11:Q2
The Q2 2011 WC rate change was the first
increase in many years
(Percent Change)
6
Number of Workers Covered Under Workers’ Compensation Programs, 1989-2009
Source: National Academy of Social Insurance.
0
20,000
40,000
60,000
80,000
100,000
120,000
140,0008
9
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
To
tal
Wo
rke
rs
(00
0)
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
10
Pe
rce
nt C
ha
ng
e
Total Workers Percent change
7
Total Wages Covered Under Workers’ Compensation Programs, 1989-2009
Source: National Academy of Social Insurance.
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
$5,500
$6,0008
9
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
To
tal W
ag
es
($
bill
ion
s)
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
10
Pe
rce
nt C
ha
ng
e
Total Wages Percent change
8
Private Industry Occupational Injuries and Illnesses, 1987-2009
Source: National Academy of Social Insurance.
0
1
2
3
4
5
6
7
8
9
10
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
All
ca
se
s (
mill
ion
s)
0
1
2
3
4
5
6
7
8
9
10
All c
as
es
(pe
rce
nt)
Number of Cases Incident Rate
9
Number of Workers Covered by Workers’ Compensation, By State, 2008-2009
State 2008-2009 Percent change
State 2008-2009 Percent change
State 2008-2009 Percent change
AL -5.8% LA -2.2% OK -8.0%AK -0.6% ME -3.6% OR -6.3%AZ -7.5% MD -3.4% PA -3.5%AR -3.5% MA -3.5% RI -4.6%CA -5.7% MI -7.6% SC -6.2%CO -4.9% MN -4.2% SD -2.2%CT -4.3% MS -4.7% TN -6.0%DE -4.9% MO -4.2% TX 2.2%DC -2.0% MT -3.9% UT -5.4%FL -6.8% NE -2.5% VT -3.6%GA -6.2% NV -9.3% VA -3.8%HI -4.9% NH -3.8% WA -4.3%ID -6.2% NJ -4.2% WV -2.8%IL -5.0% NM -4.2% WI -4.9%IN -6.0% NY -3.1% WY -4.3%IA -3.1% NC -5.7%KS -4.4% ND -0.3%KY -4.7% OH -5.7% Total -4.0%
Source: National Academy of Social Insurance.
10
Total Wages Covered by Workers’ Compensation, By State, 2008-2009
State 2008-2009 Percent change
State 2008-2009 Percent change
State 2008-2009 Percent change
AL -4.4% LA -1.8% OK -4.1%AK 2.4% ME -2.8% OR -5.8%AZ -6.9% MD -1.8% PA -2.6%AR -1.4% MA -4.4% RI -3.9%CA -5.6% MI -8.9% SC -5.0%CO -4.5% MN -5.3% SD -0.7%CT -5.4% MS -3.9% TN -5.5%DE -4.6% MO -5.1% TX -3.6%DC -1.8% MT -2.7% UT -4.1%FL -6.0% NE -1.4% VT -2.5%GA -5.8% NV -10.0% VA -2.0%HI -3.7% NH -3.8% WA -2.5%ID -5.7% NJ -4.5% WV -0.4%IL -5.8% NM -2.8% WI -4.9%IN -6.4% NY -7.3% WY -6.2%IA -2.6% NC -5.6%KS -4.0% ND 2.3%KY -3.3% OH -5.5% Total -4.7%
Source: National Academy of Social Insurance.
11
Workers’ Compensation Benefits and Costs Per $100 of Covered Wages, 1980-2009
1.761.67
1.50 1.49
1.64
1.791.86
1.942.04
2.18 2.16 2.13 2.172.05
1.83
1.66
1.491.38 1.35 1.34
1.43
1.57
1.71 1.70 1.71
1.571.46
1.34 1.30
0.96 0.971.04 1.05 1.09
1.171.23
1.29 1.341.46
1.571.65 1.65
1.531.47
1.351.26
1.17 1.13 1.121.06 1.10 1.13 1.16 1.13 1.09
0.99 0.96 0.98 1.03
1.58
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Employer Costs Benefits
Source: National Academy of Social Insurance.
12
Workers’ Compensation Medical and Cash Benefits Per $100 of Covered Wages, 1980-2009
0.28 0.290.34 0.34 0.36
0.390.43
0.470.50
0.570.62
0.660.69
0.66
0.580.54
0.50 0.48 0.48 0.48 0.470.50 0.52
0.55 0.53 0.510.47 0.46
0.49 0.51
0.68 0.68 0.70 0.71 0.730.78 0.80 0.82 0.84
0.890.94
0.990.96
0.87 0.89
0.810.76
0.680.65 0.63
0.60 0.60 0.61 0.61 0.61 0.59
0.520.49 0.48
0.52
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Medical Benefits Cash Benefits
Source: National Academy of Social Insurance.
13
Labor Market Trends
Massive Job Losses Sapped the Economy and WC Exposure;
Trend Improved in Early 2011 but Is Now Weak
14
Unemployment and Underemployment Rates: Stubbornly High in 2011
2
4
6
8
10
12
14
16
18
Jan00
Jan01
Jan02
Jan03
Jan04
Jan05
Jan06
Jan07
Jan08
Jan09
Jan10
Jan11
Traditional Unemployment Rate U-3
Unemployment + Underemployment Rate U-6
Unemployment fell to 9.1% in
June
Unemployment peaked at 10.1% in October 2009, highest monthly rate since 1983.
Peak rate in the last 30 years:
10.8% in November -
December 1982
Source: US Bureau of Labor Statistics; Insurance Information Institute.
U-6 went from 8.0% in March
2007 to 17.5% in October 2009; Stood at 16.1%
in July 2011
January 2000 through July 2011, Seasonally Adjusted (%)
Recession ended in
November 2001
Unemployment kept rising for
19 more months
Recession began in
December 2007
Stubbornly high unemployment and underemploymentwill constrain payroll growth, which directly affects WC exposure
Jul 11
18
67
92
13
65 1
27
42
15
-10
9-1
46
5 97
23
-12
-85 -58
-16
1-2
53
-23
0-2
57
-34
7-4
56
-54
7-7
34 -66
7-8
06 -7
07
-74
4 -64
9-3
34
-45
2-2
97 -2
15
-18
6-2
62
75
-83
16 6
2
22
95
1 61 1
17
14
31
12 1
93
12
8 16
79
42
61
21
92
41
99
80 1
54
14
4
(1,000)
(800)
(600)
(400)
(200)
0
200
400
Jan
-07
Fe
b-0
7M
ar-
07
Ap
r-0
7M
ay-
07
Jun
-07
Jul-
07
Au
g-0
7S
ep
-07
Oct
-07
No
v-0
7D
ec-
07
Jan
-08
Fe
b-0
8M
ar-
08
Ap
r-0
8M
ay-
08
Jun
-08
Jul-
08
Au
g-0
8S
ep
-08
Oct
-08
No
v-0
8D
ec-
08
Jan
-09
Fe
b-0
9M
ar-
09
Ap
r-0
9M
ay-
09
Jun
-09
Jul-
09
Au
g-0
9S
ep
-09
Oct
-09
No
v-0
9D
ec-
09
Jan
-10
Fe
b-1
0M
ar-
10
Ap
r-1
0M
ay-
10
Jun
-10
Jul-
10
Au
g-1
0S
ep
-10
Oct
-10
No
v-1
0D
ec-
10
Jan
-11
Fe
b-1
1M
ar-
11
Ap
r-1
1M
ay-
11
Jun
-11
Jul-
11
Monthly Change in Private Employment
January 2008 through July 2011* (Thousands)
Private Employers Added 2.368 million Jobs Since Jan. 2010 After Having Shed 4.66 Million Jobs in 2009 and 3.81 Million in 2008 (State and Local Governments Have Shed Hundreds of Thousands of Jobs
Source: US Bureau of Labor Statistics: http://www.bls.gov/ces/home.htm; Insurance Information Institute
Monthly Losses in Dec. 08–Mar. 09 Were
the Largest in the Post-WW II Period
Private employers added jobs in every month in 2010 for a total of
1.435 million for the year
154,000 private sector jobs were created in July
16
Change in Number Employedin Select Industries, June 2011 vs. June 2010
-27 -61-190
-382
-666
7799223257
343396
-800
-600
-400
-200
0
200
400
600
Pro
f.B
usin
ess
Ser
v.
Hea
lth C
are
&S
ocia
l Ass
ist.
Trad
e,Tr
ansp
ort.
&U
tiliti
es
Edu
catio
n
Man
ufac
turin
g
Min
ing
&Lo
ggin
g
Info
rmat
ion
Fina
ncia
lA
ctiv
ities
Con
stru
ctio
n
Leis
ure
&H
ospi
tality
Gov
ernm
ent
Sources: US Bureau of Labor Statistics “Employment Situation, June 2011”; Insurance Information Institute.
There is a great deal of variation in employment growth by industry, indicating a very uneven and slow recovery
Thousands Professional Business Services, Health Care, and Trade, Transportation &
Utilities) were the job growth leaders in the past year.
17
Monthly Change Employment*-7
2-1
44
-12
2-1
60
-13
7-1
61
-12
8-1
75
-32
1-3
80
-59
7-6
81
-77
9-7
26
-75
3-5
28 -3
87
-51
5 -34
6 -21
2-2
25
-22
46
4-1
09
14 39
20
8 31
3 43
2-1
75 -6
6-1
-41
21
09
3 15
26
82
35
22
12
17
53
46 1
17
-1,000
-800
-600
-400
-200
0
200
400
600
Ja
n 0
8F
eb
08
Ma
r 0
8A
pr
08
Ma
y 0
8Ju
n 0
8Ju
l 08
Au
g 0
8S
ep
08
Oct 0
8N
ov 0
8D
ec 0
8Ja
n 0
9F
eb
09
Ma
r 0
9A
pr
09
Ma
y 0
9Ju
n 0
9Ju
l 09
Au
g 0
9S
ep
09
Oct 0
9N
ov 0
9D
ec 0
9Ja
n 1
0F
eb
10
Ma
r 1
0A
pr
10
Ma
y 1
0Ju
n 1
0Ju
l 10
Au
g 1
0S
ep
10
Oct 1
0N
ov 1
0D
ec 1
0Ja
n 1
1F
eb
11
Ma
r 1
1A
pr
11
Ma
y 1
1Ju
n 1
1Ju
l 11
Monthly Losses in Dec. 08–Mar. 09 Were
the Largest in the Post-WW II Period
*Estimate based on Reuters poll of economists.Source: US Bureau of Labor Statistics: http://www.bls.gov/ces/home.htm; Insurance Information Institute
Job Losses Since the Recession Began in Dec. 2007 Peaked at 8.4 Mill in Dec. 09; Stands at 6.2 Million Through March 2011;
13.5 Million People are Now Defined as Unemployed
January 2008 through July 2011* (Thousands)
The job gain and loss figures in 2010 were severely distorted by the hiring and termination of temporary Census workers. In 2010, 1.178 million
nonfarm jobs were created.
117,000 nonfarm jobs were created
in July
18
Unemployment Rates by State, June 2011:Highest 25 States*
12.4
11.8
10.8
10.6
10.5
10.5
10.4
10.3
9.9
9.9
9.9
9.8
9.6
9.5
9.4
9.4
9.3
9.2
9.2
9.2
9.1
8.8
8.8
8.5
8.5
8.3
0
2
4
6
8
10
12
14
NV CA RI FL MI SC DC MS AL GA NC TN KY NJ ID OR AZ IL WA US CT MO OH CO WV IN
Une
mpl
oym
ent R
ate
(%)
*Provisional figures for June 2011, seasonally adjusted.
Sources: US Bureau of Labor Statistics; Insurance Information Institute.
In June, 28 states and the District of Columbia reported over-the-month
unemployment rate increases, 8 had decreases, and 14 had no change.
The unemployment rate in the US was 9.2% in June
19
8.2
8.1
8.0
8.0
7.8
7.8
7.6
7.6
7.6
7.5
7.5
7.4
7.0
6.8
6.7
6.6
6.0
6.0
6.0
5.9
5.5
5.3
4.9
4.8
4.1
3.2
0
2
4
6
8
10
TX AR DE NY LA ME MA PA WI AK MT UT MD NM MN KS HI IA VA WY VT OK NH SD NE ND
Une
mpl
oym
ent R
ate
(%)
Unemployment Rates By State, June 2011: Lowest 25 States*
*Provisional figures for June 2011, seasonally adjusted.Sources: US Bureau of Labor Statistics; Insurance Information Institute.
In June, 28 states and the District of Columbia reported over-the-month
unemployment rate increases, 8 had decreases, and 14 had no change.
20
Labor Underutilization: Broader than Just Unemployment
11
.2%
16
.4%
16
.5%
16
.3%
16
.8%
17
.0%
17
.5%
17
.2%
17
.3%
16
.5%
16
.8%
16
.9%
17
.1%
16
.6%
16
.5%
16
.5%
16
.7%
17
.1%
17
.0%
17
.0%
16
.7%
16
.1%
15
.9%
15
.7%
15
.9%
16
.0%
16
.2%
16
.1%
10%
11%
12%
13%
14%
15%
16%
17%
18%
% of Labor Force
Marginally Attached and Unemployed Persons Account for 16.1% of the Labor Force in July 2011 (1 Out Every 6.2 People). Unemployment Rate Alone was 9.2%. Underutilization Shows a Broader Impact on WC and
Other Commercial ExposuresNOTE: Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. Source: US Bureau of Labor Statistics; Insurance Information Institute.
21
US Unemployment Rate
4.5
%
4.5
%
4.6
%
4.8
%
4.9
% 5.4
% 6.1
%
6.9
%
8.1
%
9.3
%
9.6
% 10
.0%
9.7
%
9.6
%
9.6
%
8.9
%
9.1
%
9.1
%
9.0
%
8.9
%
8.8
%
8.7
%
8.5
%
9.6
%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
07
:Q1
07
:Q2
07
:Q3
07
:Q4
08
:Q1
08
:Q2
08
:Q3
08
:Q4
09
:Q1
09
:Q2
09
:Q3
09
:Q4
10
:Q1
10
:Q2
10
:Q3
10
:Q4
11
:Q1
11
:Q2
11
:Q3
11
:Q4
12
:Q1
12
:Q2
12
:Q3
12
:Q4
Rising unemployment eroded payrolls
and workers comp’s
exposure base.
Unemployment peaked at 10% in
late 2009.
* = actual; = forecastsSources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (8/11); Insurance Information Institute
2007:Q1 to 2012:Q4F*
Unemployment forecasts remain stubbornly high
through 2011, but still imply millions of new
jobs will created.
Jobless figures have been revised
upwards for 2011/12
22
Workers Compensation and the Economy
Workers Comp Exposure and Performance is Intimately Linked to
the Economy and Labor Market
23
US Real GDP Growth*
* Estimates/Forecasts from Blue Chip Economic Indicators.Source: US Department of Commerce, Blue Economic Indicators 8/11; Insurance Information Institute.
2.7
%
0.9
%
3.2
%
2.3
%
2.9
%
-0.7
%
0.6
%
-4.0
%
-6.8
% -4.9
%
-0.7
%
1.6
%
5.0
%
3.9
%
3.8
%
2.5
%
2.3
%
0.4
%
1.3
%
2.2
%
2.5
%
2.4
%
2.6
%
2.8
%2
.9%4.1
%
1.1
%
1.8
%
2.5
% 3.6
%
3.1
%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
2
00
0
2
00
1
2
00
2
2
00
3
2
00
4
2
00
5
2
00
6
07
:1Q
07
:2Q
07
:3Q
07
:4Q
08
:1Q
08
:2Q
08
:3Q
08
:4Q
09
:1Q
09
:2Q
09
:3Q
09
:4Q
10
:1Q
10
:2Q
10
:3Q
10
:4Q
11
:1Q
11
:2Q
11
:3Q
11
:4Q
12
:1Q
12
:2Q
12
:3Q
12
:4Q
Demand for Insurance Continues To Be Impacted by Sluggish Economic Conditions, but the Benefits of Even Slow Growth Will Compound and
Gradually Benefit the Economy Broadly
Real GDP Growth (%)
Recession began in Dec. 2007. Economic toll of credit
crunch, housing slump, labor market contraction has
been severe but modest recovery is underway
The Q4:2008 decline was the steepest since the Q1:1982 drop of 6.8%
2011 got off to a sluggish start, but growth is expected
to accelerate in the remainder of the year. This is a major
positive for insurance demand and exposure growth.
24
Length of US Business Cycles,1929–Present*
10 1116
6
168 8
19
50
80
3745
39
24
106
36
58
12
92
120
73
26
43
138 11 10 8
0
10
20
30
40
50
60
70
80
90
100
110
120
Aug1929
May1937
Feb1945
Nov1948
Jul1953
Aug1957
Apr1960
Dec1969
Nov1973
Jan1980
Jul1981
Jul1990
Mar2001
Dec2007
Month Recession Started
Contraction Expansion Following
*Through July 2011. Most recent recession began Dec. 2007 and ended June 2009. ** Post-WW II period through end of most recent expansion. Sources: National Bureau of Economic Research; Insurance Information Institute.
Average Duration**Recession = 10.4 MosExpansion = 60.5 Mos
Length of Expansions Greatly Exceeds
Contractions
Duration (Months) The “Great Recession”
lasted 19 months, longest
since Great Depression
2011 Financial Overview State Economic Growth Varied in 2010
25
Texas had one of the stronger economies in 2010 and has
generally outperformed during the economic
downturn
Hard hit Midwest and Northeast states finally
entering recovery in 2010
27
Direct Premiums Written: All P/C Lines Percent Change by State, 2005-2010
44
.8
25
.4
19
.8
17
.3
16
.6
14
.2
13
.9
12
.4
12
.3
11
.9
9.1
8.1
8.1
7.1
6.8
5.4
5.2
4.7
3.8
3.7
3.1
3.0
1.5
1.2
1.1
0
5
10
15
20
25
30
35
40
45
ND
SD LA
WY
OK
WV
KS IA TX
MT
NE
DE
MS
NM SC
DC
UT
AR
NC ID WA
AL
WI
AK
TN
Pe
ce
nt
ch
an
ge
(%
)
Sources: SNL Financial LC.; Insurance Information Institute.
Top 25 States
North Dakota is the growth juggernaut of the P/C
insurance industry—too bad nobody lives there…
28
0.7
0.6
0.1
-0.1
-0.3
-0.5
-0.8
-1.4
-1.6
-1.7
-2.5
-2.8
-2.9
-3.4
-3.6
-4.1
-4.5
-4.7
-4.8
-5.7
-5.8
-8
-8.2
-8.3
-13
.5
-14
.2
-15
.5
-20
-15
-10
-5
0
5M
D
MO
KY IN NY
GA
MN
VA
US
PA
OR FL IL CT
VT
OH RI
CO
NJ HI
ME
NH
MA
AZ
NV MI
CA
Pe
ce
nt
ch
an
ge
(%
)
Sources: SNL Financial LC; Insurance Information Institute.
Bottom 25 States
States with the poorest performing economies also produced the most negative net change in premiums of
the past 5 years
Direct Premiums Written: All P/C Lines Percent Change by State, 2005-2010
US Direct Premiums Written declined by 1.6% between 2005
and 2010
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
$25
$30
$35
$40
$45
$50Wage & Salary DisbursementsWC NPW
29
Payroll Base* WC NWP
Wage and Salary Disbursements (Payroll Base) vs. Workers Comp Net Written Premiums
*Private employment; Shaded areas indicate recessions. Sources: NBER (recessions); Federal Reserve Bank of St. Louis at http://research.stlouisfed.org/fred2/series/WASCUR ; NCCI; I.I.I.
29% of NPW has been eroded away by the soft market and weak economy
7/90-3/91 3/01-11/0112/07-6/09
$Billions $Billions
WC premium volume dropped two years before
the recession began
WC net premiums written were down $14B or 29.3% to
$33.8B in 2010 after peaking at $47.8B
in 2005
30
Direct Premiums Written: Worker’s CompPercent Change by State, 2005-2010*
34
.4
23
.1
14
.2
10
.2
9.0
4.6
1.4
-3.7
-7.3
-9.3
-10
.0
-10
.3
-10
.9
-10
.9
-13
.0
-14
.7
-15
.3
-15
.9
-16
.9
-17
.8
-19
.8
-21
.4
-21
.7
-35-30-25-20-15-10-505
10152025303540
OK
MT ID LA
SD IA KS
NY WI
PA
MS IL
NM NJ
NE
MD
NC AL
CT VA
SC
AR
MN
Pe
ce
nt
ch
an
ge
(%
)
*Excludes monopolistic fund states: ND, OH, WA, WY as well as WV, which transitioned to a competitive structure during this period.
Sources: SNL Financial LC.; Insurance Information Institute.
Top 25 States5
,80
7.1
Only 7 (small) states showed growth in workers
comp premium volume between 2005 and 2010
31
Direct Premiums Written: Worker’s CompPercent Change by State, 2005-2010*
-22
.6
-23
.7
-24
.2
-25
.0
-25
.2
-25
.2
-25
.3
-26
.8
-26
.9
-28
.1
-28
.3
-28
.7
-29
.0
-30
.1
-32
.5
-32
.6
-33
.8
-34
.7
-36
.1
-42
.7
-45
.4
-50
.7
-51
.2
-57
.7
-70
-60
-50
-40
-30
-20
-10
0
AZ
ME
GA
KY IN NH
OR
DC
MA
TN VT
US
TX
AK
MO MI
UT RI
CO
DE
NV HI
CA
FL
Pe
ce
nt
ch
an
ge
(%
)
Bottom 25 States
States with the poorest performing economies also produced the most negative net change in premiums of
the past 5 years
*Excludes monopolistic fund states: ND, OH, WA, WY as well as WV, which transitioned to a competitive structure during this period.
Sources: SNL Financial LC.; Insurance Information Institute.
Workers Comp DPW plunged 28.7% from
between 2005 and 2010
Crisis-Driven Exposure Drivers in Workers Comp
34
Economic Obstacles and Opportunities to Growth
35
(Millions of Units)
New Private Housing Starts, 1990-2016F
1.4
8
1.4
7 1.6
2
1.6
4
1.5
7
1.6
0 1.7
1 1.8
5 1.9
6 2.0
7
1.8
0
1.3
6
0.9
1
0.5
5
0.5
9
0.5
9 0.7
6
1.2
0 1.3
3 1.4
3
1.5
0
1.3
51.4
6
1.2
9
1.2
0
1.0
11.1
9
0.3
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11F12F13F14F15F16F
Source: U.S. Department of Commerce; Blue Chip Economic Indicators (10/10 and 7/11); Insurance Information Institute.
Little Exposure Growth Likely for Homeowners Insurers Until 2013. Also Affects Commercial Insurers with Construction Risk Exposure, Surety
New home starts plunged
72% from 2005-2009; A
net annual decline of 1.49 million units, lowest since
records began in 1959
The plunge and lack of recovery in homebuilding and in construction in general is
holding back payroll exposure growth
Job growth, improved credit
market conditions and demographics
will eventually boost home construction
66%
68%
70%
72%
74%
76%
78%
80%
82%
Ma
r 0
1
Ju
n 0
1
Se
p 0
1
De
c 0
1
Ma
r 0
2
Ju
n 0
2
Se
p 0
2
De
c 0
2
Ma
r 0
3
Ju
n 0
3
Se
p 0
3
De
c 0
3
Ma
r 0
4
Ju
n 0
4
Se
p 0
4
De
c 0
4
Ma
r 0
5
Ju
n 0
5
Se
p 0
5
De
c 0
5
Ma
r 0
6
Ju
n 0
6
Se
p 0
6
De
c 0
6
Ma
r 0
7
Ju
n 0
7
Se
p 0
7
De
c 0
7
Ma
r 0
8
Ju
n 0
8
Se
p 0
8
De
c 0
8
Ma
r 0
9
Ju
n 0
9
Se
p 0
9
De
c 0
9
Ma
r 1
0
Ju
n 1
0
Se
p 1
0
De
c 1
0
Ma
r 1
1
Ju
n 1
1
Recovery in Capacity Utilization is a Positive Sign for Commercial Exposures
Source: Federal Reserve Board statistical releases at http://www.federalreserve.gov/releases/g17/Current/default.htm. 37
Percent of Industrial Capacity
Hurricane Katrina
March 2001-November 2001
recession
“Full Capacity”
The closer the economy is to operating at “full
capacity,” the greater the inflationary pressure
The US operated at 76.7% of industrial
capacity in Jun. 2011, above the June 2009
low of 68.3%
December 2007-June 2009 Recession
39
43,6
9448
,125
69,3
0062
,436
64,0
04 71,2
77 81,2
3582
,446
63,8
5363
,235
64,8
53 71,5
4970
,643
62,3
0452
,374
51,9
5953
,549
54,0
2744
,367
37,8
8435
,472
40,0
9938
,540
35,0
3734
,317
39,2
0119
,695 28
,322
43,5
4660
,837
56,2
8212
,376
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Business Bankruptcy Filings,1980-2011:Q1
Sources: American Bankruptcy Institute at http://www.abiworld.org/AM/AMTemplate.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=61633 ; Insurance Information Institute
Significant Exposure Implications for All Commercial Lines as Business Bankruptcies Begin to Decline
2010 bankruptcies totaled 56,282, down 7.5% from 60,837 in 2009—which were up 40%
from 2008 and the most since 1993. 2011:Q1 filings are down 14.4% from 2010:Q1.
% Change Surrounding Recessions
1980-82 58.6%1980-87 88.7%1990-91 10.3%2000-01 13.0%2006-09 208.9%*
40
Private Sector Business Starts, 1993:Q2 – 2010:Q3*
175
186
174
180
186
192
188
187 18
918
6 190 19
419
119
9 204
202
195
196
196
206
206
201
192
198
206
206
203
211
205
212
200 20
520
420
419
720
320
920
1
192
192
193
201 20
420
221
0 212
209
216 22
0 223
220
220
210
221
212
204
218
209
207
207
199
191 19
317
2 176
169
184
172
172
182
203
150
160
170
180
190
200
210
220
230
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Business Starts Were Down Nearly 20% in the Recession, Holding Back Most Types of Commercial Insurance Exposure
* Data through September 30, 2010 are the latest available as of July 25, 2011; Seasonally adjustedSource: Bureau of Labor Statistics, http://www.bls.gov/news.release/cewbd.t08.htm.
(Thousands)
344,000 new business starts were recorded through the first half of 2010, which was likely the slowest year for
new business starts since 1993.
Business Starts2006: 872,0002007: 843,0002008: 790,0002009: 697,000 2010:Q3 526,000
41
11 Industries for the Next 10 Years: Insurance Solutions Needed
Shipping (Rail, Marine, Trucking)
Health Sciences
Health Care
Energy (Traditional)
Alternative Energy
Agriculture/Agribusiness
Natural Resources
Environmental
Technology (incl. Biotechnology)
Light Manufacturing
Export-Oriented Industries
Many industries are
poised for growth, but
many insurers do not write in
these economic segments
42
Percentage Change in Employment in Select Industries, June 2011 vs. June 2010
-0.8% -1.0%-2.8% -2.9% -3.3%
0.9%1.0%2.1%2.4%
7.6%
10.9%
-6%-4%-2%0%2%4%6%8%
10%12%
Min
ing
&Lo
ggin
g
Edu
catio
n
Pro
f. &
Bus
ines
sS
erv.
Hea
lth &
Soc
ial A
ssis
t.
Trad
e,Tr
ansp
ort.
&U
til
Man
ufac
turin
g
Fina
naci
alA
ctiv
ities
Info
rmat
ion
Leis
ure
&H
ospi
talit
y
Gov
ernm
ent
Con
stru
ctio
n
Sources: US Bureau of Labor Statistics “Employment Situation, June 2011”; Insurance Information Institute.
There is a great deal of variation in employment growth by industry, indicating a very uneven and slow recovery
Percentage Change
Mining and Logging activities were the job growth leaders over the past
year, in percentage terms
43
Change in Number Employedin Select Industries, June 2011 vs. June 2010
-27 -61-190
-382
-666
7799223257
343396
-800
-600
-400
-200
0
200
400
600
Pro
f.B
usin
ess
Ser
v.
Hea
lth C
are
&S
ocia
l Ass
ist.
Trad
e,Tr
ansp
ort.
&U
tiliti
es
Edu
catio
n
Man
ufac
turin
g
Min
ing
&Lo
ggin
g
Info
rmat
ion
Fina
ncia
lA
ctiv
ities
Con
stru
ctio
n
Leis
ure
&H
ospi
talit
y
Gov
ernm
ent
Sources: US Bureau of Labor Statistics “Employment Situation, June 2011”; Insurance Information Institute.
There is a great deal of variation in employment growth by industry, indicating a very uneven and slow recovery
Thousands Professional Business Services, Health Care, and Trade, Transportation &
Utilities) were the job growth leaders in the past year.
44
Percentage Change in Employment in Select Sub-Industries, June 2011 vs. June 2010
-6.2%
2.2%
-2.9%
1.9% 1.7%
6.1%6.0%
-2.9%-3.9%
-7.2%
7.8%
-8%-6%-4%-2%0%2%4%6%8%
10%O
il &
Gas
Ext
ract
ion
Logg
ing
Con
stru
ctio
nof
Bui
ldin
gs
Con
str
uctio
n--
Hea
vy &
Mfg
--P
rimar
yM
etal
sM
fg--
Fabr
icat
edM
etal
s
Mfg
--Woo
dP
rodu
cts\
Tran
spor
t--Tr
uck
Tran
spor
t--W
ater
Hea
lth C
are
Hea
lth C
are-
-Nur
sing
&R
esid
entia
l
Sources: US Bureau of Labor Statistics “Employment Situation, June 2011”; Insurance Information Institute.
There is a great deal of variation in employment growth by industry, indicating a very uneven and slow recovery
% ChangeOil and Gas
Extraction was among the fastest growing industry
sub-segments over the past
year, in % terms
45
Change in Number Employed in Select Sub-Industries, June 2011 vs. June 2010
-22
27
-2
162
5479
22
-26-49
-4
12
(100)
(50)
0
50
100
150
200O
il &
Gas
Ext
ract
ion
Logg
ing
Con
stru
ctio
nof
Bui
ldin
gs
Con
str
uctio
n--
Hea
vy &
Mfg
--P
rimar
yM
etal
sM
fg--
Fabr
icat
edM
etal
s
Mfg
--Woo
dP
rodu
cts\
Tran
spor
t--Tr
uck
Tran
spor
t--W
ater
Hea
lth C
are:
Abu
lato
ryS
erv.
Hea
lth C
are-
-Nur
sing
&R
esid
entia
l
Sources: US Bureau of Labor Statistics “Employment Situation, June 2011”; Insurance Information Institute.
There is a great deal of variation in employment growth by industry, indicating a very uneven and slow recovery
ThousandsIndustries related to
natural resource extraction,
processing and manufacturing are doing well, along with health care
Where Will the Growth in WC Exposure Come From?
46
Industry and Occupation Growth Analysis
48
Occupations with Largest Numerical Growth, 2008–2018: Health, Services Dominate
Sources: US Bureau of Labor Statistics: Occupational Outlook Handbook, 2010-2011 Edition; Insurance Information Institute
Dollar growth in WC exposures should grow the most (at current rate levels) in the health and services industries
Occupations
Number of
new jobs(in thousands) Percent change
Wages (May 2008 median) Education/training category
Registered nurses 581.5 22 $ 62,450 Associate degree
Home health aides 460.9 50 20,460 Short-term on-the-job training
Customer service representatives 399.5 18 29,860 Moderate-term on-the-job training
Combined food preparation and serving workers, including fast food
394.3 15 16,430 Short-term on-the-job training
Personal and home care aides 375.8 46 19,180 Short-term on-the-job training
Retail salespersons 374.7 8 20,510 Short-term on-the-job training
Office clerks, general 358.7 12 25,320 Short-term on-the-job training
Accountants and auditors 279.4 22 59,430 Bachelor's degree
Nursing aides, orderlies, and attendants
276.0 19 23,850 Postsecondary vocational award
Postsecondary teachers 256.9 15 58,830 Doctoral degree
Construction laborers 255.9 20 28,520 Moderate-term on-the-job training
Elementary school teachers, except special education
244.2 16 49,330 Bachelor's degree
Truck drivers, heavy and tractor-trailer
232.9 13 37,270 Short-term on-the-job training
Landscaping and groundskeeping workers
217.1 18 23,150 Short-term on-the-job training
Bookkeeping, accounting, and auditing clerks
212.4 10 32,510 Moderate-term on-the-job training
Executive secretaries and administrative assistants
204.4 13 40,030 Work experience in a related occupation
Management analysts 178.3 24 73,570 Bachelor's or higher degree, plus work experience
Computer software engineers, applications
175.1 34 85,430 Bachelor's degree
Receptionists and information clerks
172.9 15 24,550 Short-term on-the-job training
Carpenters 165.4 13 38,940 Long-term on-the-job trainingSOURCE: BLS Occupational Employment Statistics and Division of Occupational Outlook
50
(Thousands)
704
654
446
322
304
256
236
118
102
788
838
1,431
1,683
2,657
4,017
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500
Health Care and Social Assistance
Professional, Scientific, Tech. Srvs.
Education Services
Administration, Support, Waste Mgmt & Removal
Accomodation & Food Services
Government
Other Services (excl. Govt.)
Retail Trade
Transportation and Warehousing
Finance & Insurance
Arts, Entertainment & Recreation
Wholesale Trade
Real Estate, Rental & Leasing
Information
Mgmt. of Companies & Enterprises
Health, Science and Education will be
important sources of exposure growth for WC
insurers this decade
Sources: US Bureau of Labor Statistics: Occupational Outlook Handbook, 2010-2011 Edition; Insurance Information Institute
Numeric Change in Wage and Salary Employment in Service-Providing Industries: 2008-2018P
www.iii.org
Thank you for your timeand your attention!
Twitter: twitter.com/bob_hartwig
Insurance Information Institute Online: