When workers’ compensation premiums are raised, the number of claims and the payment of these claims are usually blamed for the increase. That might not be the case according to a University of California at Davis study. Published in the September-October issue of Public Health Reports, the UC Davis study shows that higher premiums may be linked to decreases in the Dow Jones Industrial Average and interest rates on U.S. Treasury bonds.
Quotes from the UC Davis Health System Article:
“Insurance companies appear to have been setting premiums according to their returns on the stock and bond markets, not according to the number of claims they have. They invest because they need a financial cushion to pay for claims and, if they lose, raise premiums to recoup their losses.”
“The association of premiums with the stock market and Treasury bonds was consistent and strong. Increasing premiums had nothing to do with the number of injured workers, who often are incorrectly blamed for increasing premiums for employers.”
– J. Paul Leigh, UC Davis Professor, Senior Author of study
Workers’ Compensation Premium Hikes Linked With Stock Losses, Rather Than Claims (UC Davis)