California Workers’ Comp Premium Down Nearly 10%

California workers’ compensation total direct written premium (DWP) fell nearly 10 percent last year, dropping to a nine-year low of $6.9 billion, according to market share data from the National Association of Insurance Commissioners (NAIC) released by the California Department of Insurance. The market share report shows the $750 million decline in aggregate premium in 2009 marked the fifth year in a row that California workers’ compensation premium volume has fallen, with the total for 2009 down $9.2 billion (57 percent) from the record $16.1 billion noted in 2004.

The California Workers’ Compensation Institute cited a number of factors leading to the drop in premium, including:

• a decline in claim frequency,
• the economic recession which has pushed the state’s unemployment rate to 12.6 percent (with more than 350,000 jobs lost in the past year alone), and
• a string of rate reductions following the 2002-2004 legislative reforms, which resulted in a soft market that has continued despite rising claim severity.

CWCI pointed out: “In its summary of insurer claims experience through the end of 2009, the Workers’ Compensation Insurance Rating Bureau (WCIRB) reported that the average California workers’ compensation insurer rate per $100 of payroll fell to $2.35 last year, down from $2.37 in 2008, and nearly 64 percent below the all-time high of $6.45 per $100 of covered payroll recorded at the peak in 2003.”

According to the market share report, incurred losses increased slightly from 2008’s $4.54 billion to 2009’s $4.64 billion. The loss ratio was 68.52 percent in 2009, up from 58.97 percent in 2008.

The number of companies — 207— writing workers’ compensation insurance in the Golden State has not changed in the past three years. As expected, State Compensation Insurance Fund holds the largest market share, with $1.287 billion in 2009 direct written premium. “However, its market share, which hit 53 percent during the market crisis of 2003 fell to 18.6 percent last year,” CWCI said.

Meanwhile, Zurich Insurance and American International Group traded the No. 2 and No. 3 spots, Travelers and Liberty Mutual traded the No. 4 and No. 5 spots, and Hartford Fire & Casualty jumped from eighth position to sixth after writing nearly 31 percent more premium in 2009. Zenith National Insurance held onto the seventh position with 3.9 percent of the market, while Berkshire Hathaway fell two spots to No. 8 after reducing its premium volume by 46.3 percent. In contrast, Everest Reinsurance cracked the top 10 list last year, rising from No. 14 in 2008 to No. 9 in 2009 by increasing its total DWP 62.5 percent, garnering 3 percent of the market, ranking it just ahead of Employers Group, which retained the No. 10 slot with 2.7 percent of statewide premium.

“The latest premium totals indicate that the California workers’ compensation market is becoming less concentrated, as the top 10 underwriting groups accounted for 65.3 percent of statewide DWP last year, down from 69.9 percent in 2008, 72 percent in 2007 and 76.7 percent in 2006. Furthermore, only three of the 10 largest writers (Travelers, Hartford and Everest) increased their total premium volume in 2009, though with statewide DWP down nearly 10 percent, both Zurich and AIG still gained market share even though their aggregate premium declined between 2008 and 2009,” CWCI said.

The NAIC figures for California workers’ compensation direct written premium are reported in the state’s Property and Casualty market share reports for 2009, which can be found on the Department of Insurance’s Web site under Studies, Reports and Publications.

Sources: CDI, CWCI

Topics California Trends Workers' Compensation Pricing Trends