Considering the unsettled economic climate, it's rare that you hear a statement such as, “Overall, you see a healthy and strong workers compensation system." But this is how Donna Glenn, chief actuary, The National Council on Compensation Insurance (NCCI), described the workers comp insurance market in the 2022 “State of the Line Report."

Results reported for this line of business include an 11% increase in net written premium, a calendar year combined ratio of 84%—the sixth consecutive year with a combined ratio below 90%—and a 4% overall decline in claims frequency from the prior year.

With such positive market financial results and as rates decrease, agents can expect clients to consider the cost of their workers comp coverage and whether they can save money by switching providers in a competitive market.

Agents play a key role in presenting clients with the best options. In the transition period, agents need to consider other factors to ensure their clients maintain adequate coverage.

“As carriers compete to maintain profitability and win your business, it's critical to consider the 'cost' of the premium and the relationship with the carrier, rather than just the 'price' of the premium," says Kirk Aguilera, managing partner and National Complex Workers Compensation Practice Group leader at The Liberty Company Insurance Brokers.

“A carrier that offers credits to attract your business but does not effectively manage or mitigate your claims will only increase your costs over time," Aguilera adds.

Clients have differing businesses and, therefore, differing requirements, and an agent should understand each client's needs and to match those with specific carriers.

“Some may like the simplicity of a carrier that can write multiple lines; others may require a carrier of national reach; still others may benefit from specialized loss prevention," says Mort Large, director of workers compensation strategy at Nationwide. “Needless to say, it is important for an agent to find out what a business needs and then highlight those particular offerings."

Also, “if the insured has had audit issues in the past, an agent should find a solution with a company that does monthly payroll reporting to ease some of the stress that may come with the audit process," says Justin Dorman, national product manager, workers compensation, Burns & Wilcox. “Furthermore, the client might value personal interaction or could prefer to only interact through a website—there are carriers who focus on customer service and others that cater to more tech-savvy customers."

It is here that the independent agent's strengths come into play, both in their knowledge of each workers comp program and their understanding of their client and their business.

“An agent's knowledge of the market can help provide insight into a carrier's quality of service and pricing stability," says Jeff Cole, assistant vice president of national accounts, Sentry Insurance. “For larger insureds on deductibles, the impact of quality loss control and claim services tends to outweigh the more visible premium charge. Understanding how the carrier is willing and able to interact with the agent and customer is critical to a successful risk management program."

“It's essential to examine individual carrier performance in managing claims," Aguilera agrees. “Questions to consider include: How many claims are handled per adjuster? Will there be an assigned adjuster? Will they collaborate with our team when strategizing the best approach to mitigate the claim? And what has been our team's history and experience with that carrier?"

Further, “larger businesses should explore loss-sensitive plans with carriers who are able to provide quality claims and loss prevention services and be able to share any cost savings with the insured," says Michael Teng, assistant vice president of regional products, pricing, and underwriting, Sentry Insurance. An accident that doesn't happen not only translates into insurance cost savings, but also higher morale, productivity and worker satisfaction.

Loss prevention services may be increasing in relevance to clients, too. While the workers comp class continues to be the most profitable property & casualty line of business, there has been a “notable rise in severity, with medical claim severity increasing 5% and indemnity claim severity growing 6% year-on-year," according to NCCI.

“We'd recommend that agents look at the financial strength and stability of the workers comp carrier when considering moving their client from one to another," says Bill Traver, vice president, business insurance product, Travelers. “Other factors include an insurer's willingness to be a player through all market cycles and its investment in innovation resources to help stay ahead of workers comp risks."

Given the recent turmoil in the financial markets with the collapse of three U.S. banks—Silvergate, SVB and Signature Bank—in less than two weeks, fears of a full-blown financial crisis may be top of mind for some clients.

“Agents should pay attention to a carrier's financial rating since workers comp is a long-tail line," Teng says. “Claims can take years to settle, and insureds need to make sure their carrier has enough money to pay claims many years into the future."

Olivia Overman is IA content editor.