Avoiding the Big Crunch

Thursday, May 26, 2011 | 0

By Julius Young
Boxer & Gerson

Cosmology is so fascinating.

If the universe (?ur universe?) was created with a big bang, will it expand forever? Or like an expanded balloon, will it deflate into a big crunch?

Is our universe closed, or open? Will things disintegrate in a big rip?

None of us know the answers.

But in the workers' comp world, the trend toward a big crunch has ended.

For the first time in five years, aggregate California workers' comp premium has risen.

Just a few years ago, it seemed that the California workers' comp universe would be ever expanding. Premium was over $16 billion in 2004.

With the 2003 and 2004 reforms, and with the post-Bear Stearns and post-Lehman Brothers economic turmoil, premium volume tanked.

By 2009, premium volume was $6.9 billion.

High unemployment, outsourcing and decreasing claims frequency were major factors in the shift.

Decreasing premium has put pressure on insurer profitability, as overhead to premium ratios soared.

But the period of contraction of the comp universe may be coming to an end. While much ultimately depends on whether the California economy can avoid going into a double-dip recession, it appears that there is some rebound occurring.

In 2010 premium volume increase by 3.1%, to $7.1 billion, according to data from the National Association of Insurance Commissioners (NAIC).

To see 2010 market share and premium volume stats for California workers' comp insurers, click here:
http://www.insurance.ca.gov/0400-news/0200-studies-reports/0100-market-share/2010/upload/Top25grps2010.pdf.

After you have your fill of those figures, you can bend your mind a bit by considering various theories on whether our universe, like California's comp system, is ever expanding or contracting: http://en.wikipedia.org/wiki/Ultimate_fate_of_the_universe.

Julius Young is an applicants' attorney for the Boxer & Gerson law firm in Oakland. This column was reprinted with his permission from his blog, http://www.workerscompzone.com