OLDWICK, N.J.--(BUSINESS WIRE)--The workers’ compensation segment continues to outperform every other line of business in the U.S. property/casualty (P/C) industry, bolstered by ongoing declines in loss frequency and favorable reserve development, according to a new AM Best report.
The Best’s Market Segment Report, “Workers’ Compensation Segment’s Winning Streak Continues,” notes that the workers’ compensation line has been more profitable than any other personal or commercial line of business since 2015, which underlies AM Best’s current stable outlook on this specific segment.
The combined ratio for workers’ compensation was 88.7 in 2023, which was slightly more favorable than the median 10-year combined ratio of 91.5.
“Effective workplace safety initiatives of the past decade or more have helped control loss frequency, and, along with declines in fraud and in defense costs, have contributed to the line’s excellent underwriting margins,” said Christopher Graham, senior industry research analyst, AM Best. “Equally as impressive, the workers’ compensation line’s net operating ratio was 14.5 points better than that of the industry.”
Based on year-end 2023 AM Best data, workers’ compensation loss and loss adjustment expense (LAE) reserve development for older accident years was favorable by $6.9 billion in 2023. Prior accident-year development for the entire P/C industry was favorable by around $2.9 billion, indicating that the aggregate loss development for P/C lines other than workers’ compensation was adverse by about $4 billion.
Additional highlights of the report include:
- Medical severity remains low, below even core the consumer price index, adding to favorable loss development.
- Pricing in this segment has dropped slightly in each of the past nine quarters. However, other factors have spurred premium growth, mainly wage increases and job growth, bringing net premium above pre-pandemic levels.
- The market remains competitive and profitable. There is very little difference in total direct premiums written among the top insurers, and the top 25 insurers account for about 67% of all workers’ compensation business—a low amount compared with other lines.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=346569.
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 does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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