ORLANDO, Florida – The workers compensation industry is healthy, with net written premium increasing 11% in 2022 to $47.5 billion, a level similar to 2019 prior to the start of the COVID-19 pandemic, experts with the National Council on Compensation Insurance said Tuesday during its Annual Insights Symposium.
Last year was also the sixth consecutive that the overall workers comp combined ratio was below 90, and the ninth straight year of comp underwriting profitability, said NCCI Chief Actuary Donna Glenn.
“Workers comp continues to be the most profitable property and casualty line of business,” Ms. Glenn said during a presentation on the State of the Line Report. “Frequency has returned to a 20-year average decline, and COVID-19 has diminished considerably.”
Despite what NCCI lauded as good news, the industry saw a notable rise in claim severity, with medical claim severity increasing about 5% and indemnity claim severity rising about 6% year over year, she said.
Meanwhile, overall lost-time claim frequency has declined slightly during the past two years, which could in part be attributed to workplace safety improvements, automation and employee experience, she said.
There were rises in workplace injuries in specific sectors in 2021 and 2022, including package delivery and warehousing, two industries that Ms. Glenn said saw many new hires.
Strains, slips and falls continue to comprise the most common workplace injuries, and there has been a recent increase in caught-in-between injuries as well as burns and abrasions. The largest decrease in claim frequency was tied to a drop in motor vehicle accidents.
Manufacturing added many new hires in 2021 and 2022, and claims frequency could be tied to shorter worker tenure combined with insufficient training, Ms. Glenn said. Similar claims frequency occurred in package delivery, which saw a “significant rise in workplace injuries,” she said.
Yet “the long-term decline (in overall injuries) appears to be continuing despite some increases in specific areas,” Ms. Glenn said.
The industry continues to monitor medical cost changes, and medical lost-time claim severity estimates for 2022 are 5% higher than in 2021, Ms. Glenn said.
On premium collected, Ms. Glenn said economic factors such as payroll play a large role in the net written premium increase, and that sectors such as transportation, warehousing and utilities continue to see larger than average growth.
“Despite many moving parts, wage growth over the last few years has brought workers compensation premium back to where it was in 2019,” Ms. Glenn said. “Employment is back to pre-pandemic levels, and wages are driving the overall payroll gain.”
The workers compensation combined ratio was 84 in 2022, compared with 87.2 in 2021, and Ms. Glenn said comp continues to be in a strong financial position, with nearly a decade straight of underwriting profitability.
As for COVID-19, Ms. Glenn said workers are continuing to contract the virus on the job, “but the numbers have diminished considerably.” COVID-19 claims represented 1% of total losses over the years 2020 to 2022, she said.
During a question-and-answer period, Dan Benzshawel, NCCI executive director and actuary, said worker wages continue to outpace average comp claim costs and that frequency remains the main cost driver in the workers comp system.
Carolyn Wise, NCCI manager and associate actuary, said she expects a continuing decline in claims frequency, linking the projected drop to workplace automation and the “general movement toward safer jobs.”
Ms. Wise said 2022 saw above-average increases in medical severity but that medical fee schedules for physician services and facilities in some states continue to act as good “cost containment mechanisms.”
“While prices matter, utilization matters too,” Ms. Wise said.
