Workers’ Comp Insurance Marks a Decade of Profitability in 2023

The private workers’ compensation insurance system delivered another strong performance in 2023, according to an analysis of the latest data from the National Council on Compensation Insurance (NCCI).

Net written premiums increased by 1% to reach $43 billion, up from $42.5 billion in 2022.

Private workers’ comp carriers achieved their 10th-consecutive year of underwriting profitability, posting a calendar year combined ratio of 86 in 2023. This marks the seventh-straight year the workers’ compensation insurance market has maintained a combined ratio below 90.

“The overall numbers for workers compensation show a financially healthy system,” said Donna Glenn, chief actuary at NCCI.

Property & Casualty Results

The property and casualty (P&C) insurance industry saw robust premium growth in 2023, with total net written premium for private carriers increasing 10.4% to reach $851.7 billion, up from $771.7 billion the prior year.

All lines of P&C business experienced rising premiums last year. The growth was most pronounced in personal auto and homeowners insurance, which are the largest lines in the P&C sector. The premium increases were primarily driven by substantial rate hikes implemented across the country over the course of 2023.

Despite the strong premium growth, the P&C sector’s profitability remained challenged. The industry’s calendar year combined ratio, a key measure of underwriting performance, came in at 102 for 2023. This was unchanged from the 102 combined ratio recorded in 2022, indicating a second consecutive year of underwriting losses for P&C insurers.

Workers’ Compensation Results

Workers’ compensation net written premiums increased a modest 1% in 2023 to $43 billion, up from $42.5 billion in 2022. This represented the smallest increase among major P&C insurance lines. The slight uptick was driven by underlying payroll growth that was generally offset by continued decreases in rates.

While the overall P&C market expanded in 2023, workers’ comp premiums made up a shrinking piece of the pie. Workers’ comp’s share of total P&C premiums decreased to 5% in 2023, down from nearly 8% in 2022.

For private workers’ compensation carriers, the combined ratio ticked up to 86 in 2023 from 84 the prior year. This was primarily due to an increase in the loss ratio, which rose to 44.6 from 32.1 in 2022.

Despite the slight increase, the 2023 combined ratio of 86 marks the seventh consecutive year the key metric has come in under 90. It also marks a full decade of underwriting gains for workers’ comp insurers. Translating the combined ratio another way, it equates to a substantial 14-point underwriting gain, highlighting the significant underwriting profitability, the report stated.

Drilling down to the individual carrier level, the strong 2023 performance was widespread. Nearly 40% of workers’ comp carriers achieved a net combined ratio below the industry’s 86 mark. Additionally, two-thirds of workers’ comp insurers enjoyed an underwriting gain for the year.

Looking Ahead

“The workers compensation system has unique features that have differentiated us from other commercial lines in terms of overall performance during the past several years,” said NCCI president and CEO Bill Donnell.

However, Donnell emphasized there are key questions ahead that may impact the future trajectory of workers’ comp. Issues such as frequency change and medical cost inflation are areas to watch closely, he said.

Lost-time claim frequency declined by 8% in 2023, which is more than two times the size of the long-term average decline, NCCI found. Severity changes were considered moderate in 2023 with increases of 2% for medical claim severity and 5% for indemnity claim severity.

The full 2024 State of the Line report is available on the NCCI website. &