US Workers Compensation Segment Continues Its Winning Streak

The workers compensation insurance segment remains the top-performing line in the US property and casualty (P&C) industry, driven by continued declines in loss frequency and favorable reserve development, according to a new report from AM Best.

The Best's Market Segment Report, "Workers' Compensation Segment's Winning Streak Continues," highlights that the workers compensation line has outperformed all other personal and commercial lines since 2015. This sustained profitability supports AM Best's stable outlook for the segment.

In 2023, the workers compensation combined ratio was 88.7, better than the 10-year median of 91.5. "Effective workplace safety initiatives of the past decade or more have helped control loss frequency, and, along with declines in fraud and in defense costs, have contributed to the line's excellent underwriting margins," said Christopher Graham, senior industry research analyst at AM Best. He also noted that the line's net operating ratio outperformed the industry by 14.5 points.

At year-end 2023, AM Best data showed favorable reserve development of $6.9 billion for older accident years in the workers compensation line compared to $2.9 billion across the broader P&C industry, which experienced adverse reserve development in other segments.

Key findings from the report include the following.

• Medical severity remains low, falling below core inflation metrics and supporting favorable loss development.
• While pricing has declined over the past 9 quarters, premium growth has been driven by wage increases and job growth, pushing net premium above prepandemic levels.
• The market remains competitive and profitable, with the top 25 insurers accounting for around 67 percent of the workers compensation market—a relatively low concentration compared to other insurance lines.

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.