The workers’ compensation market is healthy and profitable. This year’s “State of the Line” report, published by the National Council of Compensation Insurance (NCCI), indicates that the workers’ compensation calendar year 2015 combined ratio for private carriers was 94 percent. That is a six-point improvement over the 2014 combined ratio of 100 percent.
Total market net written premium for workers’ compensation increased by almost 3 percent to $45.5 billion, driven primarily by an increase in payroll.
“The positive industry results we reported today are welcome news for industry stakeholders,” said NCCI President and CEO Bill Donnell. “In addition to the positive financial results, though, we see a significant transformation under way. New monitoring technology, expanded automation, and innovation in how employees work are key indicators. The regulatory environment is transforming with new participants and shifting agendas. In addition, the frequency and potential severity of system challenges are creating levels of uncertainty as we move forward this year.”
“Overall, 2015 was another positive year for the workers’ compensation industry,” said NCCI Chief Actuary Kathy Antonello. “The combined ratio improved, claim frequency continued to decline, and operating results were strong. While the 2015 results are encouraging, we hope for continued diligence of workers’ compensation system stakeholders to ensure a strong and competitive system. For example, even though overall medical severity has lessened in recent years, prescription drug costs have continued to increase. Unchecked, this alone may contribute to an increase in future medical costs.”
The improving workers’ compensation calendar year combined ratio for private carriers was driven primarily by a decrease in the loss ratio, said the NCCI. On an accident year basis, the industry-reported 2015 workers’ compensation combined ratio was 98 percent.
Other market indicators and trends highlighted in NCCI’s “2016 State of the Line” report include:
Even so, the workers’ compensation industry faces challenges, according to the NCCI. Those include:
In an interview with Insurance Journal in late April, prior to the release of the “State of the Line” report, Donnell said the challenges that NCCI faces in the future mirror those of the overall workers’ comp system and its participants. “Externally you’ve basically got challenges to the premise of the ‘Grand Bargain.’ Maintaining this delicate balance between system benefits and cost and then adopting to the ways employees will be working in the years ahead” is a priority for NCCI, he said. “Those are the external challenges and therefore they are our challenges.”
*This story appeared previously in our sister publication Insurance Journal.