Workers compensation may have a smaller premium base, but it remains highly profitable compared to other policy lines, AM Best concludes in a new report.
The line produced more than $44.3 billion in net premiums written in 2020 (down 10 percent from 2019). That pales in comparison to lines such as private passenger auto, which booked more than $242.5 billion in net premiums written for 2020 (a 2.1 percent year-over-year dip).
But workers comp generated a 91.1 combined ratio in 2020, well below other P/C lines. Homeowners multiple peril, by contrast, booked a 107.4 combined ratio in 2020, private passenger auto had a 92.5 combined ratio and commercial auto was at 101.9. The workers comp combined ratio also won out when compared to the P/C industry combined ratio overall.
“The calendar year combined ratio of 91.1 for all insurers writing [workers comp] was markedly better than the industry’s 98.8 combined ratio,” the AM Best report noted.
Why are the results so good? AM Best said workers comp underwriters “have benefited from a decline in lost-time claims frequency that has been tied to efforts to improve workplace safety.” Declines in fraud, workplace accidents and defense costs have also helped.
AM Best’s full report is “Workers’ Compensation Still Outpacing Other Lines.”
Source: AM Best