The U.S. workers compensation insurance market has the “strongest profitability” of all lines of property/casualty business, posting an 86% combined ratio in 2023, according to the National Council on Compensation Insurance’s (NCCI) annual State of the Line report.
Last year marked the 10th consecutive year of underwriting profits for workers compensation and the seventh consecutive year with a combined ratio below 90%, NCCI reported.“
The overall numbers for workers compensation show a financially healthy system,” said Donna Glenn, chief actuary for NCCI, in a statement. “To maintain the health of the system, NCCI continues to look beyond the headline numbers to understand the intricacies of the system and identify risks that may impact our future.”
The 86% for 2023 is a two-point increase from 2022, Glenn noted during NCCI’s recent annual symposium. However, these are still “unprecedented results,” she said, and 39% of insurers writing workers compensation even achieved combined ratios lower than 86% and two-thirds were below 100%.
Net written premiums for U.S. private workers compensation insurers rose slightly from $42.5 billion in 2022 to $43 billion in 2023, according to NCCI. Adding in state funds, the total market comes to $48 billion in 2023.Results also showed an 8% decline in lost-time claim frequency, more than two times the size of the long-term average decline.“We have seen a steady decline in claim frequency for two decades in workers compensation,” said Glenn.
“The 8% improvement in 2023 stands as evidence of the extensive efforts made over the years to ensure the safety of workers on the job.”
For 2023, NCCI viewed the change in claim severity as moderate, with a 2% increase in medical claim severity and a 5% increase in indemnity claim severity.During her talk at the symposium, Glenn acknowledged that there are “some concerns of a turn and some concerns of severe cost trends” for the workers compensation market, but since 2019, workers compensation has been in an “atypical market,” characterized by blends of both hard and soft markets.
In a video, NCCI proposed data analytics have helped to improve safety, predict loss ratios, and streamline claims handling, all of which can shift the impact of market cycles.
“Will the typical underwriting cycle return?” asked NCCI. “With technological advancements and an evolving workers compensation system, there are reasons to believe the underwriting cycle today is different than what we knew in the past.”
Glenn noted that a prolonged economic setback, disruption in healthcare, or an expansion of benefits could all create challenges for workers compensation, but for right now, the market is experiencing “an era of extraordinary strength.”