The performance of the U.S. workers compensation system remains strong according to the 2023 metrics released yesterday by the National Council on Compensation Insurance (NCCI).

Private carriers produced their 10th consecutive year of underwriting profitability with a Calendar Year 2023 combined ratio of 86, according to the report.

It is the seventh consecutive year with a combined ratio below 90 for the workers compensation insurance market, the NCCI noted.

Workers compensation premium increased by just 1 percent in 2023.

“The workers compensation system has unique features that have differentiated us from other commercial lines in terms of overall performance during the past several years,” said NCCI President and CEO Bill Donnell. “However, there are key questions ahead related to issues such as frequency change and medical cost inflation.”

The workers compensation accident year 2023 combined ratio is 98 percent, with prior years continuing to experience downward reserve development, the data showed.

The workers compensation reserve redundancy grew to $18 billion, the NCCI analysis showed.

Lost-time claim frequency declined by 8 percent in the past year, which is more than two times the size of the long-term average decline.

Severity changes were considered moderate for 2023 with increases of 2 percent for medical claim severity and 5 percent for indemnity claim severity.

In a subsequent report on loss cost rate adequacy, the analysis of data going back to 2002 (NCCI states only) shows just two years (2003 and 2012) where single-digit increases occurred.

Donna Glenn, NCCI’s chief actuary and Nadege Bernard, practice leader and senior actuary, discussed the topic during the State of the Line report.

“The overall numbers for workers compensation show a financially healthy system,” said Glenn. “To maintain the health of the system, NCCI continues to look beyond the headline numbers to understand the intricacies of the system and identify risks that may impact our future.”

The analysis also showed declining frequency, most likely due to employers’ increased emphasis on safety. One important factor to watch is the aging U.S. population which continues to impact frequency and severity.

It is important to note that payroll impacts premiums. When wages rise, wage replacement benefits rise as well.

Top three payrolls in 2023 were office, healthcare and manufacturing.

The economy itself is doing well, said executive director and senior economist Stephen Cooper. “Maybe we feel like we’re in a recession, even though we are not,” Cooper added.

Despite the fact that average weekly wages increased by more than 3 percent per year, rates have continued to decline highlighting the fact that cost containment measures, like fee schedules, are working.

Twenty-three states currently have fee schedules in place.