While the economy is showing signs of improvement, workers' compensation could face different directional trends, resulting in a complex mixture of improvement and further deterioration, according to a new study by Conning Research & Consulting.
"The workers' compensation line of insurance saw its last year of underwriting profit in 2006," says Joshua Youdovin, analyst at Conning Research & Consulting. "The economic recovery and rate increases will boost premium, yet we expect that rising medical costs and increased utilization of drugs will re-introduce the specter of inflation in loss costs and reduce profitability even further."
Youdovin also notes that the line has been impacted by declining investment yields, which has created headwinds against overall profitability. While there are early signs of economic improvement, this could bring new surprises regarding risks and opportunities in the line.
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