The U.S. workers’ compensation (workers’ comp) insurance industry experienced its second best underwriting result in the past 20 years in 2023 with a net combined ratio of 87, the ninth consecutive year of generating a net underwriting profit, according to a new Issues Brief published by the Insurance Information Institute (Triple-I).
“Workers’ comp has outperformed the combined U.S. property/casualty (P/C) insurance industry in net combined ratio each year since 2015,” said Dale Porfilio, FCAS, MAAA, Triple-I’s chief insurance officer.
Highlights of Triple-I’s report include:
Premium
The average rate change for workers’ comp insurance has remained negative to flat for the most recent five years, comparing rate filing data available through S&P Market Global Intelligence along with industry rate changes published by Market Scout and The Council of Insurance Agents & Brokers. Across these three reporting sources, the average rate change has slightly increased while remaining negative from -3.4% in 2019 to -1.1% in 2023.
“Despite negative average rate changes in recent years, the direct written premium growth rate for workers’ comp remained positive in 2021, 2022 and 2023,” Porfilio said.
Frequency
Using total non-farm payroll as the basis for workers’ comp claim exposure and reported claims at 12 months from S&P Global Market Intelligence by year, workers’ comp frequency has been declining steadily from 2014 to 2023 at an annual compound rate of -5.1%.
“The reduction of injuries and illnesses over the past few decades in the U.S. can be contributed to many factors, including the issue and enforcement of workplace health and safety regulations by the Occupational Safety and Health Administration (OSHA), combined with technological advancements in safety equipment and monitoring reported by the National Council on Compensation Insurance (NCCI),” Porfilio said.
Severity
Using net ultimate loss and defense and cost containment (DCC) at 12 months, as reported by S&P Global Market Intelligence, divided by the number of reported claims at 12 months, severity in workers’ comp has been increasing at an annual compound rate of 4.4% from 2014 to 2023. However, using nominal GDP as the basis of severity, it has been decreasing at the opposite rate of -4.4%.
Loss Development
Workers’ comp net prior year development has followed net incurred loss from 2009 to 2023 with a strong correlation of 96%, including 11 consecutive years of negative net prior year development.
About Insurance Information Institute (Triple-I)
With more than 50 insurance company members — including regional, super-regional, national and global carriers — the Insurance Information Institute (Triple-I) is the #1 online source for insurance information in the U.S. The organization’s website, blog and social media channels offer a wealth of data-driven research studies, white papers, videos, articles, infographics and other resources solely dedicated to explaining insurance and enhancing knowledge.
Unlike other sources, Triple-I’s sole focus is creating and disseminating information to empower consumers. It neither lobbies nor sells insurance. Triple-I offers objective, fact-based information about insurance – information that is rooted in economic and actuarial soundness. Triple-I is affiliated with The Institutes.
About The Institutes
The Institutes are a global not-for-profit comprising diverse affiliates that educate, elevate and connect people in the essential disciplines of risk management and insurance. Through products and services offered by The Institutes’ nearly 20 affiliated business units, people and organizations are empowered to help those in need with a focus on understanding, predicting and preventing losses to create a more resilient world.
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“Workers’ comp has outperformed the combined U.S. property/casualty (P/C) #insurance industry in net combined ratio each year since 2015." Dale Porfilio, Chief Insurance Officer, @iiiorg
Contacts
Media Contact:
Florida Press Office
Mark Friedlander
904-806-7813
MarkF@iii.org
