The U.S. workers’ compensation line of business combined ratio worsened in 2023 despite premium growth year-over-year, according to an S&P Global Market Intelligence analysis. “The workers’ compensation combined ratio, which measures underwriting profit, increased to 84.9 from 84.5, even as direct premiums written and net premiums written also grew, totaling $56.69 billion, and $48.02 billion, respectively,” according to the report.
“The top 20 writers of workers’ comp business mostly saw premium increases in 2023, although for more than half of them, the percentage increase was in the single digits,” the report notes. “Only four saw their premiums rise by double digits, with the largest year-over-year change being Arch Capital, which reported premium growth of 14.6%. The Travelers Cos. Inc. held on to its position as the top workers’ comp insurer in the U.S., with its premiums written growing 1.6% year over year.”
Experts Weigh In
“The biggest driver of workers’ compensation cost is medical,” says Edward Moriarty, Jr., senior partner, Moriarty & Associates, P.C. “Despite medical and pharma management, with special proactive case management of lost time matters with significant medical, severity, and duration factors, inflation continues to spiral with no end in sight, especially noting the greying of our workforce with complicating comorbidities driving medical costs...forward. Hold on for a bumpy ride this decade,” he warns.
“The data in the S&P Global Market Intelligence report showcases a positive future for the workers’ compensation industry despite initial data pointing to a worsened combined ratio in 2023,” opines Sarah Thomas, managing partner, Jones Jones LLC. “Both direct and net premiums continued to grow in 2023, and the combined ratio is climbing back toward the five-year peak from 2021.
“The information shared in reports such as the S&P Global Market Intelligence analysis is invaluable. Such data provides industry players with a more detailed understanding of the current state of workers’ compensation issues while revealing patterns and trends that point to what the future may hold. Insights into the current and future state of the industry allow us to be more accurate in our negotiations and defense of our insurance clients.”
Tricia Bellich, partner, Lewis Brisbois, notes that “The combined ratio for workers’ compensation line dipped in 2023, although premiums continued to increase year after year in the current trends. Underwriting continues to be profitable with a net increase of 1% in written premiums for 2023. Despite the slight dip, workers’ compensation continues to fare better than property/casualty lines as workers’ comp as a whole remains strong. Driving this resilience in the workers’ comp market are various factors, such as a strong economy, increased safety training of employees, and insightful best claim practices. However, in 2024, while the first quarter is also strong, the industry could be impacted by geopolitical events, rising inflation, and...the labor market tak[ing] a downturn. If such negative factors gain significant momentum, claim frequency and claim spend will rise. While in the years to come, the workers’ comp market may be impacted in pay transparency laws, climate change initiatives, and the aging labor force, for now, worker’s compensation line of business is holding strong with cautious optimism,” Bellich concludes.