The U.S. workers' compensation insurance industry reported its second-best underwriting result in two decades for 2023, achieving a net combined ratio of 87. This marks the ninth consecutive year of net underwriting profit, as highlighted by the Insurance Information Institute (Triple-I) in a recent Issues Brief.
"Workers’ comp has outperformed the combined U.S. property/casualty (P/C) insurance industry in net combined ratio each year since 2015," stated Dale Porfilio, Triple-I’s chief insurance officer.
The report details several key aspects:
**Premiums:** The average rate change for workers' comp insurance has been negative to flat over the past five years. Data from S&P Market Global Intelligence, Market Scout, and The Council of Insurance Agents & Brokers show an increase from -3.4% in 2019 to -1.1% in 2023. Despite these negative rate changes, "the direct written premium growth rate for workers’ comp remained positive in 2021, 2022 and 2023," according to Porfilio.
**Frequency:** Based on total non-farm payroll data and claims reported at 12 months from S&P Global Market Intelligence, workers' comp frequency has decreased steadily from 2014 to 2023 at an annual compound rate of -5.1%. Porfilio attributes this decline to factors such as workplace health and safety regulations enforced by OSHA and technological advancements in safety equipment.
**Severity:** Using net ultimate loss and defense cost containment at 12 months divided by reported claims at the same period, severity has increased annually by a compound rate of 4.4% from 2014 to 2023. However, when using nominal GDP as a basis for severity, it shows a decrease at an opposite rate of -4.4%.
**Loss Development:** Workers' comp net prior year development closely follows net incurred loss from 2009 to 2023 with a strong correlation of 96%, including eleven consecutive years of negative net prior year development.