Workers compensation insurers’ underwriting results continued to outpace the rest of the U.S. property/casualty commercial sector in 2022, as they benefited from the long-term decline in workplace accidents and a reduction in fraudulent claims, according to an A.M. Best industry segment report released Tuesday.
The report notes that favorable prior-year loss reserve development continued to bolster the insurance industry’s reserve position in 2022, owing to the long-term declines in claims frequency.
The report noted that in 2022 workers comp had a combined ratio of 87.8%, nearly 15 percentage points lower than the overall property/casualty segment’s 102.4.
Trending are rising payroll levels, the report said, noting that workers comp premiums, based on payroll, “benefited from the largest U.S. wage growth in over 25 years, coupled with strong job growth, which has helped increase its overall premium to pre-pandemic levels.”
Medical and indemnity severity increased, but the magnitude of these increases was less than the increase in wages, A.M. Best found, adding that this higher payroll base for workers comp “kept the increase in claim severity manageable.”
The report also notes that workers comp pricing has declined since 2015, except for the post-pandemic period from the second quarter of 2020 through 2021, when modest increases became the norm. The segment is still subject to “a number of factors with longer-term implications on operating performance,” including its being affected by rising inflationary pressures. Higher wages have driven indemnity costs up, resulting in a modest increase in claims severity, according to the report.