by Ed Sneneh, Illinois Workers Compensation Insurance Specialist
The California State Compensation Insurance Fund surprised many people recently when official said that they will be laying off between 1,500 and 1,800 staff members. But this did not come as a surprise to many people who understand the mayhem that the workers compensation industry has been going through since 2005. The decision of the California State Compensation Insurance Fund is probably going to be followed with more similar decisions across the United States.
The continuing decline in the economic activities, slow income growth, and staggering unemployment is pushing both real and nominal wages down. Workers compensation premiums are calculated based on wages paid. Since the harder to insure, and more premium paying, industries such as transportation and construction, were hardest hit, the workers compensation insurance industry is being significantly affected by these economic trends.
The impact of these changes on the average consumer is perhaps negligible. Regular insurance customers will not see an increase or decrease in the rates of workers compensation. The sectors that will be affected by this would include:
1. Insurers that focus primarily on offering workers compensation. Liberty Mutual Insurance Company and its subsidiary Wausau Insurance Company are the biggest provideds of workers compensation in the USA.
2. State sponsored pools, workers compensation trusts, and other workers compensation insurance intermediaries brokers and agents.
3. Sectors that provide support services to the workers compensation insurance industry such as rehabilitation services, chiropractor services and other medical and non medical services affiliated with the workers compensation industry.
While workers comepnsation insurance is mandatory, employment rates and wages paid to workers will be crticial to the health of the segment of the insurance market. Also, less workers compensation premiums (and coverages) mean potentially more claims on health insurance policies, and perhaps to a lesser extent on commercial auto insurance policies, due to the lack of workers compensation.
Other segments that may be affected by the decline in the workers compensation premiums is the occupational accidents insurance. More business may go to the route of purchasing an occupational accident policy (occ/acc) as an alternative to workers compensation.
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