The average reported rate increase for Workers’ Compensation is approximately +2.7% on a countrywide basis, down about 3.6 percentage points compared to the average rate increase of +6.3% from our September 2013 report.
Year over year, the average rate changes for the middle market are running almost 3.8 percentage points below September 2013 and national account average rate changes have dropped by about 3.4 percentage points since September 2013. Global account rate increases are down about 2.8 percentage points since last September.
Additionally, September’s average rate increases were down about 4.6 points from the December 2013 report. But regional trends vary from the national averages.
Average and median Workers’ Comp rates have significantly eased in all market segments since December 2013 and larger accounts saw the sharpest reduction. Both middle market and national accounts saw average rate increases around 2.75%; global accounts had average rate increases of 3.6%. More than 25% of respondents reported flat rates or rate decreases during the past quarter.
Please note that throughout this report, we will refer to middle market and large accounts. For the purposes of this report, middle market accounts are primarily guaranteed cost and, although some clients may have a loss sensitive program, their deductible level is generally at or below $250k on their Workers’ Compensation program but most other lines are guaranteed cost. Large accounts, for the purpose of report is defined, as national accounts or global accounts. National accounts are, generally, loss sensitive accounts with operations in North America. Global accounts are loss sensitive accounts with operations not only in North America but globally and these clients usually have retentions on all of the primary casualty placements which are greater than $500mm per occurrence.
Both the middle market and large account graphs indicate that average rate change distribution is continuing to shift to the left, which means that rates changes are moderating and have returned to roughly what they were in December 2011.
Median rate changes for construction and real estate rate remain slightly higher than for most other industries. Countrywide construction rates levels are a result of the higher hazard nature of employment. However, we believe the rate change in real estate is due to employee concentrations and some remaining uncertainty surrounding the terms of TRIA’s renewal.
WC Average Market Survey Rates – by Industry
Average rate changes vary region by region range; from a low of +1.0% in the Midwest to a high of +6.4% in NY. This quarter, rate changes in California were not the highest in the country; after years and years of rate increases (in some case these have been double-digit rate increases year on year), California rate trends are moderate at 4.1%.
Rate trends in NY are the highest in the country, driven by both the uncertainty surrounding TRIA and construction.
Rate increases across the New England states are the lowest they have been in years, at just 2.5%. This is somewhat of a surprise as Massachusetts remains a challenging Workers’ Compensation market. The Workers’ Compensation premium rate ranking for Connecticut is the second highest in the country.
Rate trends in other regions show improvement for buyers.
- Atlantic North: 2.5%
- Atlantic South: 3.3%
- NY Metro: 6.4%
- Midwest: 1.0%
- West: 3.5%
- California: 4.1%
- Non-California West: 2.8%
Excess Workers’ Compensation Market Trends
Average reported excess WC rate changes are at +3.5%, down from last quarter. The rates are down approximately 2 percentage points from where they were a year ago.
Global accounts are showing the greatest improvement in average rates, dropping by 2.2 percentage points, while median rates dropped by 1.7 percentage points from a year ago. The high retentions used by global accounts result in the premiums pricing purely for catastrophic risk, which is highly sensitive to medical inflation in a low interest rate environment.
National account rates also showed improvement from a year ago, dropping 1.6 percentage points at the median and on average.
Middle market accounts also improved, with rate changes down 1.8 percentage points on average and showed the best improvement with a drop of 2.2 percentage points at the median. Regional Excess Workers’ Compensation rates vary.
- Atlantic North: 7.3%
- Atlantic South: 3.1%
- NY Metro: 3.3%
- South: 2.5%
- Midwest: 2.2%
- West: 2.9%
- California: 4.9%
- Non-California West: -0.1%