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ALL EYES AHEAD in your industry and knows the differences in coverage, and the pros and cons of each insurance company. Workers' Compensation Comp is trending positively after six years of rate increases (see Ta- ble 2). Rates peaked in 2003 at 6.29. The reason for the higher rates is attributable to the lousy underwriting results from 1999 to 2002. As rates went up, results improved and from 2003 to 2009, rates fell off 67 percent to an average of $2.10. While this was good news for insurance buyers, it was bad for the insurance industry, and rates started to climb to combat the poor combined ratios. Since then, rates have increased more than 40 percent, but it's important to remem- ber they're still less than half of what they were in 2003. While rates continued to increase modestly through 2014 and 2015, it's anticipated they'll be fat in 2016. Note that this is an average. Every classifcation (there are more than 250) is affected by the experience of that class. Some will go down fairly substantially, but others (Class Code 5606, Contractors Executive Supervisors is a good example) could go up. Surety Outlook 2016: Do more with less There has been a slow and steady improvement in the surety industry in recent years that has been mirrored in the U.S. economy and other related fnancial markets. In the not-so-distant aftermath of the 2008 economic meltdown, and the stock market's 2015 poor performance, the surety outlook for 2016 remains positive, but will be signifcantly challenged by factors that infuence the construction and commercial business markets. Astute contractors have not abandoned the lessons learned in the recent post-recession recovery. Today's construction frms are leaner and meaner, with a focus on bottom-line results. An overall acceptable proft margin for efforts expended is manda- tory. But owners' expectations still are in a buyers' market mode, interest rates are artifcially low, fuel and material prices are cheap, technology applications are ever improving and there is a painfully growing worker shortage. Going forward, successful frms cau- tiously will continue to grow their operations with an eye on "doing more with less." Health Insurance Due to the changes in the Affordable Care Act (ACA), medical insurance costs in 2015 increased 20 percent to 40 percent. The early renewal strategy in 2013 helped employers delay the effects of the law and grandmothering helped in 2014. The 2015 medical renewals for companies with two to 50 employees realized all the impacts of the law. Rates currently are determined by the employee and their dependent's individual ages, plan design and location of the company. A family of five will pay for each family member based on each individual's age and the plan they select. Some younger employees or families with one child may realize lower premiums. All of the small group plans have changed to conform with the law and most have higher deductibles and co-pays; there- fore, employees must pay more when they use the services. In 2016, insurance carriers will try to figure out how to survive after implementing all of the ACA requirements. Rates will continue to increase, as the plan's taxes and fees continue to rise. Employers should budget a 10 percent to 15 percent increase, and depending on plan change options, rates could settle in at +5-10 percent. It is a pretty good time to be an insurance buyer (with the exception of health insurance). The industry has abundant surplus and decent results. Most businesses will be able to negotiate fat rates, while some may see rate reductions. But insurance premiums must be kept in perspective. They're only one component in the cost of risk. Time spent managing risk, training employees to be safe, dealing with claims, funding uncovered claims and a number of other costs all factor in as well. CCR Jeff Cavignac, CPCU, RPLU, ARM, James P. Schabarum II, CPCU, AFSB, and Patrick Casinelli, RHU, REBC, CHRS, are principals of Cavignac & Associates, a leading risk management and commercial insurance brokerage frm. For more information, visit www.cavignac.com. Going forward, successful frms cautiously will continue to grow their operations with an eye on "doing more with less." 92 COMMERCIAL CONSTRUCTION & RENOVATION — MARCH : APRIL 2016