For the eighth year running, the workers’ compensation insurance market saw underwriting profitability, the National Council on Compensation Insurance (NCCI) reported at its Annual Insights Symposium. During the 2021 calendar year, the sector saw a combined ratio of 87, which marked the fifth consecutive year the line returned a combined ratio below 90.
Workers’ comp had the lowest combined ratio across all P&C lines when looking at calendar year data, according to Donna Glenn, chief actuary at NCCI. This was driven by a significant reserve release, in excess of $5 billion, she explained, adding: “Workers’ comp continues to be the most profitable line according to calendar year data.”
Net premiums increased around 1% to reach $43 billion, according to NCCI, which noted private carrier premiums accounted for $38 billion of that total. Workers’ compensation reserves grew to a redundancy of $16 billion (as of year-end 2021).
“Strong employment and significant wage growth are fueling workers’ compensation payroll increases. We have a remarkably strong and healthy system right now,” Glenn said. “In some cases, 2020 was an anomaly; however, in most cases, it was consistent and ‘business as usual.’ The same was true with 2021.”
Although this past year did see a rise in lost-time claim frequency, NCCI reported data shows a long-term decline has continued. Further, NCCI reported there was no change expected in medical and indemnity claims severity during 2021.
However, challenges could be in store for the workers’ comp sector as inflation has the potential to increase medical costs. Further, the pace of change is accelerating and the business environment is shifting equally as fast, according to Bill Donnell, president and CEO of NCCI.
“The workers’ compensation system is challenged to step up once again. That means using data more effectively and keeping the focus on serving injured workers and their families,” Donnell said during the Annual Insight Symposium’s opening address. “For years we’ve talked about all the many changes and shifting demands as being ‘on the horizon.’ Now the horizon is here and we must be ready for it all.”
