Businesses continued to see smooth renewals for workers compensation coverage late last year, and there’s little sign of the buyers’ market changing in 2024, experts say.
The line remains profitable for insurers, and employers have enjoyed reduced rates or flat renewals for the past several years, according to numerous market surveys.
The industry still faces some challenges, such as changes in various states adding mental injuries to some comp claims and rising catastrophic injuries.
“Conditions remain stable and favorable for buyers,” said Debbie Goldstine, Chicago-based executive vice president, U.S. casualty, technical intelligence and emerging risks practice leader for Lockton Cos. LLC.
Profitable underwriting results, favorable reserves, a “decent” interest rate environment for comp – a long-tail line that relies on investment income – and “tons of market competition” have made the line the best performing in the property/casualty marketplace, Ms. Goldstine said.
Insurers “can balance their portfolios’ more challenging liability and property lines with work comp,” she said.
The industry combined ratio for workers comp will likely be under 100% for 2023, marking the 10th consecutive year of underwriting profits, said Jeff Eddinger, Boca Raton, Florida-based senior division executive for the National Council on Compensation Insurance.
Those conditions “are just going to put downward pressure on the loss costs,” he added.
Experts say there are issues they are keeping tabs on, including emerging regulations that are shifting compensability, especially for mental injuries, and medical inflation.
Dan Aronson, New York-based U.S. casualty practice leader for Marsh Inc., said a rise in workplace violence is an area to watch, because “previously the focus was around first responders” in terms of allowing for mental injuries in workers compensation.
There’s currently a push to apply mental health presumptions to all workers. For example, Connecticut in 2023 enacted legislation that allows for mental injury compensability for any worker who witnesses a harrowing or life-threatening incident. “This could be a precursor” for other states, Mr. Aronson said.
Data on costs related to mental injuries is scant because many of the regulatory changes are relatively new, Mr. Eddinger said.
Medical inflation, which has not kept up with overall market inflation, is another area of concern. While fee schedules that help manage most types of injuries affecting workers — for example, musculoskeletal injuries that call for imaging, pain management and physical therapy — help keep comp treatment costs at bay, one subset of injuries could push comp costs significantly higher: catastrophic injuries.
“Catastrophic injuries require extraordinary care, advanced treatments that are outside of those caps,” Ms. Goldstine said. “The frequency of the catastrophic injury may be ticking up, whereas the rest of the frequency seems to be stable, and, so, if those catastrophic frequency levels continued to take up, then that can lead to overall increases in claim costs.”