Workers’ comp 2024 outlook: Long-stable market starting to show ‘cracks in the armor’
How can brokers take advantage of the current environment?
This article was produced in partnership with Amwins.
Gia Snape of Insurance Business America sat down with Tony Foley, senior vice president, workers’ compensation at Amwins Specialty Casualty Solutions, who shares his outlook on workers’ compensation for 2024 and offers insight into how retail brokers can best navigate shifts in the market.
Workers’ compensation has been marked by several years of profitability, fostering a competitive market with rate decreases and high capacity.
While these conditions are expected to persist for another year or two, there are signs that the market cycle is turning, an Amwins expert told Insurance Business.
“There aren’t many surprises, unlike in property, where you could have a catastrophic storm, hurricane, or wildfire that can upset the market,” said Tony Foley (pictured), senior vice president, workers’ compensation at Amwins Specialty Casualty Solutions.
“For eight straight years, we’ve had a soft market. But we’re starting to see some changes.”
Though claims frequency is down, claims severity is up, which could eventually lead to reinsurance rate increases.
“The cost of larger indemnity claims is increasing due to medical inflation, and we’re seeing many more six-figure claims than we used to,” Foley said.
“Ultimately, it could impact the overall rates in workers’ compensation and get us out of the soft market cycle.”
Workers’ comp trends to watch
Foley attributes the steady decrease in claims to the rise in automation, better training, and improved risk-management tools in workplaces, especially in the hospitality and manufacturing industries.
Insureds’ focus on safety culture and risk mitigation in their organizations has paid off and made workers’ comp a more profitable line of business for carriers. In some cases, automation has transformed work and significantly cut claims frequency.
“Trash hauling, for instance, can be hazardous,” Foley said. “Workers could hurt their backs lifting, slip on ice, or get bitten by dogs. We’ve seen all different types of claims.
“But many metropolitan areas have moved to machines doing the work of picking up and dumping trash, as opposed to workers jumping off the backs of trucks, lifting and tossing trash in, and that has made a big impact in this vertical.”
Another trend is carriers packaging workers’ comp with other lines of business.
“Workers’ comp used to be more of a monoline coverage. Now we’re starting to see carriers combining different casualty products or lines that aren’t as profitable with workers’ comp to balance out their book,” Foley said.
Geographically, markets such as California, New Jersey and New York are showing hints of hardening due to higher claims costs driven by litigation and medical inflation. These states tend to lead the charge for market shifts, and experts will be keeping an eye out for any ripple effects in 2024 and beyond.
Wage increases, costlier medical treatment, and general inflation are contributing to higher claims costs across the board. But Foley doesn’t expect the soft market in workers’ comp to change overnight.
“I think the market will be soft again in 2024,” he said. “Workers’ comp is highly regulated, so carriers are bound by their filed rates. But eventually, they won’t get to the rates they need if they keep going lower and lower.”
How can retail agents and insureds navigate the workers’ comp market in 2024?
Foley shared tips for retail agents and insureds to make the most of the soft market.
He advised agents to home in on carriers who can offer sophisticated underwriting that won’t paint risks with broad brush strokes instead of just shopping for the lowest premium. He also highlighted the importance of market expertise.
“It’s hard to win on price. Instead, we need to focus on service and partner with carriers that will listen to an underwriting story and consider risks they normally wouldn’t take to help the insured expand their business,” Foley said.
“Vertical specialization is also key. Specialty wholesale distributors like Amwins have deep expertise in niche lines of business and truly understand how to underwrite the risk.”
Finally, the Amwins leader encouraged agents to shop carefully.
“There are many people that want to compete for your business right now,” he said.
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