Shrinking Workers’ Compensation Insurance Market

Over the years, injuries in the work place, and therefore workers’ compensation claims, have declined. This is due to several factors, such as technology and better material handling procedures, but one important factor is the workers’ compensation insurers. Insurance companies require businesses and individuals to mitigate the risk of injury to their employees. Coupled with the mandatory nature of workers’ compensation insurance, this has led to a drop in work-place injuries.

Recent studies indicate that this trend will continue. In fact, one study determined that by the year 2024, although the work force would grow in the United States, the number of work place injuries would drop by 15.2%, with an annual frequency improvement of 2.5%. For California specifically, the same study determined that work place injuries would drop by 12.5%. With such a large projected drop in injuries, the need for workers’ compensation insurance may also be disappearing.

The end result is that because the workplace is safer and safer each year, there will be fewer injuries every year. That means there will be fewer work place injuries and deaths to insure. Assuming this trend continues, as is projected, at some point, businesses will probably be compelled to demand why they are required to carry a type of insurance for injuries or deaths that rarely occur. Self-insurance is strictly limited and regulated in California and other states, but if the rate of injuries and deaths sufficiently drops, it is likely that businesses will be more apt to push for more practical self-insurance regulations, as commercial workers’ compensation insurance becomes, if not obsolete, at least financially illogical. After all, if insurance premiums are consistently much more than the cost to the employer to compensate the amount of injuries sustained by workers, it would make sense for a business to want to self-insure. Moreover, if this is a consistent trend seen by most businesses, it would be even more logical for self-insurance to become more attainable.

The insurance companies’ first line of defense to this would be to lower insurance premium prices and consolidate their own businesses to save on costs. Essentially, by insisting on more and more safeguards to reduce their own costs, insurance companies have made their own business less useful.

Despite the possibility that the future may hold more simple regulations for self-insurance or even eliminate the requirement for workers’ compensation insurance entirely, that is not today’s reality. Contact me today at 714-516-8188 to discuss your workers’ compensation issues and whether your business could be at risk.

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