Workers compensation, one of a few lines of coverage mandated by law, continues on a downward trend from the policy year of 2008.  According to Advisen the line is being drastically impacted market conditions, the financial crisis and the recession.  A.M. Best Co. notes that profitability was driven down in 2008 and is expected to continue 2009 as well as 2010.  Meanwhile, changing regulatory issues and reforms are continuing affect workers comp, bringing turmoil in terms of pricing, competition, loss costs, frequency, severity and profitability.

A.M. Best’s workers compensation composite, which consists of 103 groups, and unaffiliated single companies (including state funds) saw net income deteriorate by $1.4 billion or 62% to 0.9 billion 2008.

The drop in earning reflected both the fall in the financial markets and sharply reduced premium volume to persistent soft pricing, competition, legislative reform, the recession, rising unemployment and shrinking payrolls.

The composite’s 2008 net premium written fell to its lowest level since 2000, down approximately 30% from its high $20.9 billion in 2004.

After posting relatively strong underwriting results in 2005 and 2006, the composite recorded underwriting losses of $1.2 billion and $1.7 billion in 2007 and 2008 respectively, with combined ratios of $106.5 and $110.8 for the same periods.

Written premium fell for the third straight year (12%) in 2008 as compared to 2 percent for all other lines.  The combined ratio for 2008 (104.4) compares quite unfavorably with 98.5 low reported in 2006.