MALVERN, PA — The U.S. workers’ compensation insurance industry achieved its second-best underwriting performance in two decades during 2023, posting a net combined ratio of 87, according to a new Issues Brief from the Insurance Information Institute (Triple-I). This marks the ninth consecutive year of underwriting profitability for the sector, a trend that continues to outperform the broader U.S. property/casualty (P/C) insurance industry.
“Workers’ comp has outperformed the combined U.S. property/casualty insurance industry in net combined ratio each year since 2015,” said Dale Porfilio, FCAS, MAAA, and Triple-I’s Chief Insurance Officer, emphasizing the industry’s consistent strength.
Sustained Premium Growth Amid Rate Challenges
While average rate changes for workers’ comp insurance have been flat or slightly negative in recent years, ranging from -3.4% in 2019 to -1.1% in 2023, the market has maintained positive premium growth since 2021. This resilience stems from stable demand and a growing non-farm payroll base, serving as a foundation for the industry’s continued profitability.
Declining Claims Frequency Counterbalanced by Rising Severity
Claim frequency—a key measure of how often workers’ comp claims are filed—fell at an annual compound rate of 5.1% from 2014 to 2023. The decline is attributed to advancements in workplace safety protocols, improved enforcement of health standards by OSHA, and ongoing technological innovations in safety equipment.
However, severity, which evaluates the average cost per claim, has risen annually by 4.4% over the same period when measured by total losses. Adjusted for nominal GDP, severity has inversely fallen by 4.4%, reflecting the evolving dynamics of economic activity and workplace injury costs.
Strong Loss Development
The industry also demonstrated impressive stability in loss development, with 11 consecutive years of negative net prior year development—indicating favorable adjustments to previously forecasted losses. This sustained trend correlates strongly with steady gains in underwriting discipline and risk assessment.
A Resilient Future
With its 2023 performance, the U.S. workers’ comp insurance sector underscores its resilience in a changing economic and regulatory landscape. While challenges such as rising claim severity may loom, the industry’s long track record of profitability and robust loss management positions it well for sustained growth in the years ahead.
“The reduction of injuries and illnesses over the past few decades in the U.S. can be contributed to many factors, including OSHA enforcement and technological advancements,” Porfilio noted, highlighting the industry’s vital role in supporting workers and businesses alike.
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