Workers’ Comp Insurance Thrives: A 20-Year Trend Success Story
The Remarkable Success of Workers’ Compensation Insurance
The U.S. workers’ compensation insurance industry is celebrating remarkable achievements, recording the second best underwriting result in the past 20 years. The net combined ratio stood at an impressive 87 in 2023, marking the ninth consecutive year of net underwriting profitability. This positive trend reveals the resilience and effectiveness of the workers’ comp sector in managing claims and risks.
Understanding Premium Trends in Workers’ Comp
Over the recent five years, the average rate change for workers' comp insurance has trended negatively to flat, according to insights from various data sources. The rate filings, including those from S&P Global Market Intelligence, show a slight increase in the average rate change, moving from -3.4% in 2019 to -1.1% in 2023. This ongoing suppression of rates showcases a competitive landscape in the market.
Despite these challenging average rate changes, the direct written premium growth rate for workers' compensation insurance has remained positive for 2021, 2022, and 2023. Dale Porfilio, chief insurance officer at Triple-I, noted this trend as a sign of independence from typical rate impacts, demonstrating the sector's strength.
The Declining Frequency of Claims
A critical examination of claims frequency reveals a steady decline from 2014 to 2023, with an annual compound rate of -5.1%. This trend indicates a significant drop in workplace injuries and illnesses, reflecting the effectiveness of improved safety measures and regulations.
Several factors have contributed to this positive outcome, including stringent workplace health and safety regulations enforced by the Occupational Safety and Health Administration (OSHA). Additionally, advancements in safety equipment and monitoring methods have aided in minimizing risks within the workplace.
Rising Severity of Workers’ Comp Claims
While injury frequency has decreased, the severity of claims presents a different narrative. Indicators from S&P Global Market Intelligence show that severity in workers’ comp claims has been on the rise, with an annual compound rate increasing by 4.4% from 2014 to 2023. In contrast, when measured against nominal GDP, severity has seen a corresponding decrease of 4.4%.
Insights into Loss Development
Examining loss development trends reveals that workers' comp net prior year development has aligned closely with incurred loss data from 2009 to 2023, showing a remarkable correlation of 96%. The past 11 years have seen consecutive years of negative net prior year development, highlighting the challenges faced in this aspect of underwriting.
About Insurance Information Institute (Triple-I)
The Insurance Information Institute, or Triple-I, boasts more than 50 member insurance companies that include regional, national, and global carriers. It stands as a premier online information source dedicated to insurance in the U.S. With a commitment to empowering consumers through factual representations of the insurance landscape, Triple-I offers vital insights through research studies, articles, videos, and comprehensive data analysis.
About The Institutes
The Institutes are recognized not-for-profit organizations that aim to educate and connect individuals in the fields of risk management and insurance. Their focus on developing resources and services positions them as a valuable ally in empowering organizations to understand and mitigate risks effectively.
Frequently Asked Questions
What was the net combined ratio for workers' compensation in 2023?
The net combined ratio for workers' compensation insurance in 2023 was 87.
How long has the workers' comp sector experienced underwriting profits?
The workers' comp sector has demonstrated net underwriting profits for nine consecutive years.
What trends have been observed in premium rates for workers' comp insurance?
Premium rates have shown a slight increase while remaining negative, highlighting a competitive market.
What factors contributed to the declining frequency of workers’ comp claims?
Improved safety regulations and advancements in safety technology have played significant roles in decreasing claim frequency.
How does the severity of claims compare to frequency?
While claims frequency has decreased, the severity of claims has increased, suggesting that while injuries are less frequent, they are now more severe.
About The Author
Contact Olivia Taylor privately here. Or send an email with ATTN: Olivia Taylor as the subject to contact@investorshangout.com.
About Investors Hangout
Investors Hangout is a leading online stock forum for financial discussion and learning, offering a wide range of free tools and resources. It draws in traders of all levels, who exchange market knowledge, investigate trading tactics, and keep an eye on industry developments in real time. Featuring financial articles, stock message boards, quotes, charts, company profiles, and live news updates. Through cooperative learning and a wealth of informational resources, it helps users from novices creating their first portfolios to experts honing their techniques. Join Investors Hangout today: https://investorshangout.com/
The content of this article is based on factual, publicly available information and does not represent legal, financial, or investment advice. Investors Hangout does not offer financial advice, and the author is not a licensed financial advisor. Consult a qualified advisor before making any financial or investment decisions based on this article. This article should not be considered advice to purchase, sell, or hold any securities or other investments. If any of the material provided here is inaccurate, please contact us for corrections.