Midwest Comp Market: Proceed With Caution

The workers’ compensation segment in Midwestern states is not immune to the broad trends in the line nationally — including poor combined ratios, escalating medical costs and severe underreserving — but no heartland state has a crisis as acute as the headline-grabbing California fiasco.

Most Midwestern states are attractive for carriers wishing to offer workers’ compensation, according to Jim Vandenberg, commercial lines manager at Sun Prairie, Wis.-based General Casualty Insurance Cos., which operates in 26 states, primarily in the Midwest.

“Workers’ compensation is pretty much available in all the Midwestern states,” Vandenberg told Insurance Journal. “There’s nothing like what’s going on in California. It is available to the public at a pretty reasonable rate.”

‘Nowhere behaves like California’

Sheila McGraw, workers’ comp claims manager at General Casualty, added that Ohio and North Dakota have exclusive state funds.

“Nobody really writes workers’ comp insurance there,” she said. Employers are allowed to self-insure in Ohio.

“Missouri has a pretty competitive state fund, but nowhere [in the Midwest] behaves like California,” McGraw added. “Missouri’s state fund doesn’t have that much of a market share.”

Minnesota, Michigan and Nebraska also have competitive state funds, while the rest of the Midwestern states allow private carriers to provide the compulsory coverage. Indiana has long been considered a very good comp state, with combined ratios usually well under the national average.

In 2002, for example, Indiana’s comp segment had a combined ratio of 91.0, compared to the national average of 107, according to data from the National Council on Compensation Insurance. The loss ratio, meanwhile, was 62.5, compared to the national average of 78.9. These added up, as would be expected, to an excellent return on net worth of 10.1, compared to the national average of 0.2, according to data collected by the National Association of Insurance Commissioners.

McGraw had kind words to say about General Casualty’s home state of Wisconsin.

“Even through the hard times in 2001, Wisconsin has been sustaining a profitable book of business. It’s a very good system, just as Indiana’s is. It’s very good at controlling costs and limiting litigation. The system is not set up for attorneys to represent injured parties.

“The system in Indiana, for example, is very conservative. Rates aren’t as high, but they reflect for the employer that kind of conservative system. Carriers can really make a lot of money in the state of Indiana. Wisconsin and Indiana are probably the two best.”

Editor’s note: To read the rest of this story, see the Jan. 12 premiere issue of Insurance Journal Midwest, which covers Ohio, Michigan, Indiana, Wisconsin, Illinois, Missouri, Minnesota, Iowa, North Dakota, South Dakota, Nebraska and Kansas.