Workers’ compensation stays profitable & competitive
In its recently published annual “State of the Line” report, the National Council on Compensation Insurance (NCCI) noted that the workers’ compensation line reported its 10th consecutive year of underwriting profitability, closing 2024 with a calendar year combined ratio of 86%. As a result, the market remains competitive for insurance buyers.
In the first quarter, median rates for both guaranteed cost and loss-sensitive programs fell 2.9%, according to Lockton data. (See Figure 16.)
For buyers, workers’ compensation continues to offer opportunities for leverage as they structure broader insurance programs, although its importance relative to other lines has fallen. Net written premiums (NWP) for workers’ compensation fell by 3.2% in 2024, even as premiums for other major lines grew, according to NCCI’s report. (See Figure 17.) Workers’ compensation accounted for 10% of NWP for all commercial lines in 2024, down from 17% in 2004, NCCI said.
NCCI’s report highlighted that while the industry remains profitable, some trends and developments indicate that the favorable pricing environment buyers have enjoyed for the last several years may be under pressure:
The 2024 calendar year combined ratio for workers’ compensation was 86%, indicating underwriting strength across the system; the 2024 accident year combined ratio was 99%, with prior years continuing to experience downward reserve development.
Lost-time claim frequency fell by 7.6% in 2023 and 5% in 2024, both outpacing the 20-year average annual decline of 3.6% from 2004 through 2023. Medical and indemnity claim severity both grew by 6% in 2024.
The industry had a redundant reserve position of $16 billion as of the end of 2024, down from $18 billion in 2023.
Meanwhile, in April, the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) recommended a pure premium rate increase of 11.2% from the previous year, beginning Sept. 1. WCIRB also reported that the accident year combined ratio in California is projected to increase to 123% in 2024, its highest level since 2010, “driven by higher claim frequency, average loss and [loss adjustment expense] costs, with modest changes in earned premium.”
California’s rate increase is significant, as payroll for the state accounts for roughly 20% of the workers’ compensation market nationally. Other states could file for rate increases later this year and into 2026.
Prolonged workers’ compensation rate decreases in recent years have also outpaced wage growth. This could pose a challenge to the line, especially amid economic uncertainty. If medical inflation accelerates and the labor market slows, insurers may see an increase in claim frequency and severity.
1Note: Rate ranges presented here reflect expected renewal outcomes — as of the Lockton Market Update publication date — over the next quarter for most insurance buyers. These should not be taken as a guarantee of any specific results during renewal negotiations. Depending on risk profiles, loss histories, account specifics, and other factors, individual buyers may renew their programs outside these ranges.
