NCCI’s Annual Insights Symposium recently took place, an event that brings together insurance companies and state regulators to keep the industry updated on the latest trends in workers’ compensation. There were several noteworthy takeaways that we want to share with you.
Workers’ Comp Profitability
One of the most significant highlights is that workers’ comp remains highly profitable. The Combined Ratio, which measures the percentage of premiums spent on claims and expenses, stands at 86%. Remarkably, it has been a decade since this ratio exceeded 100%, showcasing an unprecedented period of profitability. This trend suggests that absent any significant law changes or economic shocks, rates are unlikely to increase anytime soon.
Learn how to reduce workers compensation when you create a safe workspace.
Market Share and Risk Appetite
For NCCI-serviced assigned risk plans, the market share is approximately 5% of the premium, a historically low figure. This indicates a strong appetite for risks in the voluntary market, suggesting that insurers are more willing than ever to underwrite various types of risks.
Indemnity Claims vs. Wage Inflation
The average cost of an indemnity claim has reached $55.2K. Interestingly, the growth of average indemnity payments has lagged behind wage inflation over the past 20 years. While wages have increased by 95%, indemnity payments have only grown by 60%. This disparity highlights a significant trend in the workers’ compensation landscape.
Decline in Lost Time Claims
There was an estimated 8% drop in lost time claims from 2022 to 2023, indicating continued improvements in workplace safety. This decline is a positive sign for both employees and employers, reflecting enhanced safety protocols and risk management practices.
Reduction in Prescription Costs
Over the past decade, the cost of prescriptions per claim has decreased by 24%. This reduction is largely driven by a dramatic decrease in opioid prescriptions and the expiration of patents for several popular non-opioid pain medications. This trend is encouraging, as it reflects the industry’s efforts to manage and reduce prescription drug costs.
Impact of Temperature on Injury Risk
As expected, the risk of injury increases with rising temperatures. However, the data reveals that what constitutes “hot” varies by location. For example, a temperature of 100 degrees in Michigan would lead to a greater increase in injuries compared to the same temperature in Arizona. This insight underscores the importance of considering local climate variations when assessing injury risks.
Industry-Specific Injury Frequency Trends
Injury frequency is declining across all industries, with construction experiencing a 3.7% average annual drop over the past eight years. However, from 2019 to 2022, the transportation and warehousing sector saw a 1.6% average annual increase in injury frequency, largely driven by a 4.8% average annual increase in payroll. This trend is particularly relevant for advisors involved with package delivery contractors.
Do you have a risk management plan for your business? If not, learn why you should.
Inflation and Workers’ Comp Medical Costs
Inflation has slowed substantially, and workers’ comp medical costs are growing at a rate similar to that of medical costs in the overall economy. This alignment suggests that workers’ comp is not experiencing disproportionate cost increases compared to the broader medical sector.
Interest Rates and Investment Returns
Interest rates are unlikely to return to pre-pandemic levels in the near future. While this scenario benefits insurance companies that invest in interest-paying securities, it presents challenges for other sectors. Insurers can take advantage of higher returns on their investments, but the broader economic implications remain complex.
For those interested in delving deeper into the discussions from the AIS, the NCCI website offers video recordings and slides from most of the presentations. Exploring these resources can provide further insights into the current state and future trends of the workers’ compensation industry.
At Muir Insurance Group, we are committed to staying at the forefront of industry trends to provide our clients with the best possible advice and coverage options. If you have any questions or need assistance with your workers’ compensation policies, please don’t hesitate to reach out to us.