Inside the State of Workers’ Compensation Performance and Stability

There have been several industry reports issued recently, including from AM Best, highlighting the insurance market’s “firming” rates, increased underwriting discipline and capacity withdrawal across several lines including Property, Umbrella Liability, and Directors & Officers (D&O) Liability as a result of natural catastrophe losses (wildfires, flooding), nuclear judgments and other liability loss trends. Workers’ Compensation insurance, however, is one area that is faring well. In fact, the Workers’ Compensation has seen its combined ratio improving to its lowest level since 1930, according to the National Council on Compensation Insurance (NCCI) 2019 State of the Line Report. 

Additionally, AM Best’s 2019 Segment Report further underscores the NCCI report, stating the performance of the Workers’ Compensation line is counter to that of many other commercial lines of Property/Casualty coverage, whose results have deteriorated. 

The Workers’ Compensation Calendar Year 2018 combined ratio, cites the NCCI, for private carriers was 83%. This is the fifth consecutive year that the Workers’ Compensation line of business has posted an underwriting gain. Total market net written premium volume increased to $48.6 billion in 2018. Private insurers had an estimated $5 billion loss reserve redundancy — the highest in at least 25 years – according to the NCCI. 

“The industry’s favorable combined ratio results over the last several years have been principally driven by notable improvement in the underlying loss ratios. Underwriting discipline has also contributed to these results in what seems to be a perpetual low interest rate environment, with low investment returns,” said Kathy Antonello, chief actuary for NCCI.Loss control and risk management improvements have contributed to a competitive market, as well. (close up this one sentence into next paragraph)

Other market indicators and trends highlighted in NCCI’s 2019 State of the Line Report included:

  • On a preliminary basis, average lost-time claim frequency across NCCI states declined by 1% in 2018. 
  • In NCCI states, the preliminary 2018 average indemnity accident year claim severity increased by 3% relative to the corresponding 2017 value. Medical lost-time claim severity increased by 1%.
  • The Workers’ Compensation Residual Market Pool premium volume was approximately $1 billion during 2018, representing a residual market share of about 7%. 

In addition, the growth of telemedicine in the Workers’ Compensation industry may also contribute its healthy performance by providing quicker, more efficient access to high-quality medical care, mitigating associated medical expenses and lost time from work – all leading to potentially reduced claim severity. “In the future, an expansive use of telehealth in Workers’ Comp would create a paradigm shift in how medical treatment is delivered, potentially leading to a curtailment in emergency room visits, a reduction in re-hospitalizations, and a shift in how and where physical therapy exercises and activities are performed,” according to the NCCI. 

Manchester Specialty Programs specializes in providing a total insurance solution to the Home Care, Allied Health and Human/Social Services, including Specialty Workers’ Compensation coverage. We have numerous avenues available to us to secure Workers’ Compensation coverage for your insureds, partner with a select group of highly rated carriers, and provide underwriting services and hold authority in our exclusive program. For more information on how you can assist your clients, please contact us at 855.972.9399 

Sources: NCCI, AM Best