Representative Larry Taylor (R-Friendswood) headlined a panel discussion at the Insurance Council of Texas 2010 Property & Casualty Mid-Year Symposium. Rick Gentry, Executive Director of the Insurance Council of Texas (ICT), moderated the panel which included Lee Ann Alexander, Denise Roggiero, Parker Rush, and Lee Loftis.
Mr. Gentry queried the panel about mandatory workers’ compensation. Texas is the only state that does not require employers to purchase workers’ compensation insurance. Those employers who do not subscribe to the workers’ compensation system have two choices: (1) go bare or (2) purchase a “non-subscriber” policy (usually governed by ERISA).
Panel members agreed there was a limited “legislative appetite” for mandating workers’ compensation. Representative Taylor expressed his desire to allow Texas businesses the choice of how best to provide for their employees. As some panel members noted, Texas should not mandate employers pay more for workers’ compensation insurance when the system is broke.
Panel members noted HB-7 and other reforms were working to successfully address increasing medical costs and return to work outcomes. As premiums declined, businesses found non-subscription less attractive. Ms. Alexander noted DWC is still implementing HB-7. She cautioned every rule or administrative action which increases the costs of workers’ compensation encourages businesses to choose non-subscription. The panel also noted relatively flat non-subscription growth.
Professor Hartwig, PhD, spoke about the general economy and the state of insurance. The combined ratio indicator has shot up quickly and investment yields are historically low. Insurance companies must seek underwriting profits, a difficult task in a soft market. During this recession, the payroll base has been negatively impacted more than any other recession, except one. Carriers must maintain adequate reserves and exercise price discipline.
Professor Hartwig also noted that two of the top ten jury verdicts have come from Texas, including a workers’ compensation bad faith verdict in San Antonio ($70 million).
Mr. Rieder from the Ward Group stated insurance companies are focusing on expense management. He noted the difficulty in growing workers’ compensation revenue and profit when the current premium level is the same as ten years ago.
In response, some carriers are freezing salaries/bonuses, modifying their pension and health plans and focusing on technology. Mr. Rieder also believes adjusters are handling less claims. The exact reasons for lower productivity despite increased use of technology is not clear.