The U.S. workers’ compensation segment continues to outperform all other lines of business in the property/casualty (P/C) industry, driven by ongoing declines in loss frequency and favorable reserve development, according to a new report from AM Best.
The Best’s Market Segment Report, titled “Workers’ Compensation Segment’s Winning Streak Continues,” highlights that the workers’ compensation line has been more profitable than any other personal or commercial line since 2015, which supports AM Best’s stable outlook for this segment.
In 2023, the workers’ compensation segment posted a combined ratio of 88.7, slightly better than the 10-year median combined ratio of 91.5. This strong performance is attributed to effective workplace safety initiatives, reduced fraud, and lower defense costs, which have contributed to solid underwriting margins.
Christopher Graham, Senior Industry Research Analyst at AM Best, noted, “The workers’ compensation line’s net operating ratio was 14.5 points better than that of the overall P/C industry.”
AM Best’s data for year-end 2023 showed that workers’ compensation had a favorable loss and loss adjustment expense (LAE) reserve development of $6.9 billion for older accident years. In comparison, the entire P/C industry saw a favorable reserve development of only $2.9 billion, with other P/C lines showing an adverse development of about $4 billion.
Key Highlights of the Report:
- Medical severity remains low, even below core consumer price index levels, contributing to favorable loss development.
- Pricing in the workers’ compensation segment has slightly declined over the past nine quarters, but wage increases and job growth have driven premium growth above pre-pandemic levels.
- The market remains competitive and profitable, with the top 25 insurers accounting for about 67% of all workers’ compensation business, a relatively low concentration compared to other lines.
For more detailed insights, the full report can be accessed at AM Best’s website.
About AM Best: AM Best is a global credit rating agency, news publisher, and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company operates in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore, and Mexico City. For more information, visit www.ambest.com.
