Texas Option Insurance Market Insights

By Lisa White, ARM, vice president of insurance services, PartnerSource

After more than a decade of intense competition that has driven soft (low premium) pricing from innovative insurers, the market for Texas injury benefit programs has experienced significant change. Since early 2019, PartnerSource has seen major carrier entrants and exits and some curbing of the availability of high coverage limits and first-dollar defense. The good news is while there has been lot of changes in carriers, capacity, selection of risk, and more, the market remains stable and profitable. Pricing has also increased as underwriters become more selective in the risks they will insure.

Here’s why:

Frequency Down, Severity Up. Claim frequency continues to decline nationally as more employees are working from home. However, this is offset by the cost of medical technology being used to treat an increasing number of catastrophic claims. Gratefully, though, this technology is saving lives and supporting greater post-injury functionality. 

Market Consolidation. Several insurance companies and large wholesale brokers have exited the market or consolidated in recent years. Two insurers are now writing these Texas policies only if they also write supporting lines of business, like multi-state workers’ compensation or other commercial insurance products. There is ample capacity and we still have other insurance markets that are strong, well-known and respected. 

Direction on Cost. Premium rate increases for this line of insurance began in 2019 and continued throughout 2020 and 2021. There may be some moderating in 2022 for clean accounts, while those with experience continue to see increases. Wage inflation may also drive increased premiums. Some insurance markets may also look to garner more premium through:

  • Treating all written premium as 100% earned from policy inception, instead of pro rata adjustments upon payroll audit, 
  • Removing the $60,000 cap on payroll for premium computation, and 
  • Increasing premium rates when employers increase ERISA benefit plan limits.  

Working Together to Promote Market Health. To maintain the health of this alternative insurance marketplace, employers, insurance companies and service providers must continue to collaborate on and advance: 

    1. Injury prevention and claim handling innovation to improve injured worker outcomes, and thereby reduce rising medical costs on catastrophic claims, loss adjustment expenses and litigation (no other insurance market has the ability to innovate and implement faster) 
    2. Improving public clarity and credibility of Texas injury benefit programs through QCARE, the Qualified Compensation Alternative for Recovering Employees designation available to employers whose program design meets 10 standards of excellence, and 
    3. Grow the Texas injury benefit market and insurance premium volume by further improving employer and insurance agent education, and finding other innovative ways to attract employer and injured worker support for this market’s clear advantages of:
      1. Faster access to the best medical providers,
      2. Better medical outcomes,
      3. Improved benefits, and
      4. Lower total cost of risk, particularly for employers with any claim frequency. 

PartnerSource keeps clients up to date on the latest trends and changes in the Texas Option insurance market. For questions or more information, please contact Lisa White, 214-239-4637, lwhite@partnersource.com