Workers Compensation Report Highlights Profitable Year in 2023

The State of the Line report presented at NCCI’s Annual Insights Symposium 2024 provides an in-depth analysis of the workers compensation (WC) industry’s performance in 2023 and early projections for 2024. The report reveals a strong year for WC, with private carriers recording a 1% increase in net written premium (NWP), bringing the total to $43 billion. The 2023 combined ratio of 86% marks the seventh consecutive year below 90%, a clear indication of sustained underwriting profitability. This extended period of financial gains reflects a favorable soft market cycle, allowing carriers to continue benefiting from strong operational performance.

In terms of claims, WC saw a significant 8% drop in lost-time claim frequency in 2023—more than double the long-term average decline of 3.4% per year. This reduction in claim frequency underscores ongoing improvements in workplace safety and risk management practices. However, the report also highlights moderate increases in claim severity, with medical claim severity rising by 2% and indemnity claim severity increasing by 5%. These trends suggest that while fewer claims are being filed, the cost of individual claims continues to rise, reflecting medical inflation and wage growth.

Additionally, the report points to a robust reserve position, with WC reserve redundancy reaching $18 billion by year-end 2023. This solid financial standing positions the industry for continued success, as the reserve buffer provides a cushion against future claim volatility.

Looking ahead to 2024, preliminary data suggests the WC line is expected to maintain its strong performance. While early results indicate a slight decline in direct written premium (DWP) of 0.9% in the first half of the year, the combined ratio is projected to remain within the 83% to 90% range, signaling continued profitability. These early indicators suggest another year of stability and financial health for the WC industry, driven by ongoing improvements in underwriting discipline and favorable claims trends.

The report concludes by highlighting the importance of ongoing monitoring of wage growth, premium audits, and claims development, which will be key factors influencing WC performance throughout 2024. NCCI emphasizes the critical role of accurate data analysis and economic forecasting in maintaining the industry’s momentum and profitability.