Workers’ Comp Strong In 2024 But Susceptible to Economic Shocks

The U.S. workers’ compensation market had another strong year, posting a combined ratio of 86% for 2024 for an 11th consecutive year of underwriting profitability, according to the National Council on Compensation Insurance’s (NCCI) annual State of the Line report.

“The workers’ compensation system continues an era of exceptional performance with strong results and a financially healthy line,” said Donna Glenn, FCAS, MAAA, chief actuary for NCCI. “And while there are early indications of potential headwinds on the horizon, the industry is positioned well to navigate these challenges.”

“Workers’ compensation is a product where compassion and analytics work hand-in-hand—protecting and caring for employees while also leveraging data to make the entire system more effective and sustainable,” said NCCI President and CEO Tracy Ryan in a statement.

Workers’ compensation premium volume dropped 3% last year to $41.6 billion, according to NCCI, but profits for the business remained level even as pricing dropped.

“There are two contributing factors: payroll and rate on payroll, mostly represented by the loss cost. Payroll growth is slowing, reverting back to the long-term average. Loss costs continue to decline, but more moderately,” NCCI said in its report.

As premium volume in other lines of business has expanded, workers’ compensation’s overall share of total commercial P&C net written premium has dropped from 17% to 10% over the last 20 years. Workers’ compensation typically has a lower combined ratio than the broader commercial lines sector.

Frequency for lost-time claims dropped by 5% in 2024, faster than the long-term average. However, claim severity sped up by 6% for both medical claims and indemnity claims. This follows severity increases of 3.4% and 4.6% in 2023.

The workers’ compensation line also has a strong reserve redundancy position of $16 billion. However, the industry’s estimated redundancy dropped from $18 billion in 2023.

“While still a strong financial position, this is the first year with a slight reduction in the estimated redundancy,” NCCI noted.

NCCI released its State of the Line report at the organization’s Annual Insights Symposium, which also featured a session on the state of the economy and its impact on workers’ compensation. The line’s exposure base is “susceptible to economic shocks,” according to NCCI.

“There’s a lot that we don’t know right now. Uncertainty is, of course, very, very high,” said Stephen Cooper, NCCI’s executive director and senior economist, during a session at AIS. He highlighted the fact that the economy declined in the first quarter of 2025 for the first time since 2022.

Whether the nation will fall into a recession remains a question mark, Cooper added, since Q1 2025 represented a bit of an outlier from typical economic activity. He attributed the hampered economic activity to winter weather, the Los Angeles wildfires, and a rush of pre-tariff import/export activity.

Cooper advised listeners to watch consumer behavior as the key indicator for economic activity, particularly with the likelihood of “pretty significant distortions” in the near future. The risk of both higher unemployment and higher core inflation has increased, he said.

“Consumers have been pretty dour about their opinions of the economy while they’ve continued to spend money like it’s going out of style,” said Cooper.

If that continues, the economy should be perfectly fine, he added. However, conditions have worsened to the point where consumer sentiment has dropped to pandemic-level lows.

“Can the consumer spend through the fourth, fifth, sixth storm they’ve weathered since COVID?” said Cooper. “This is really what we want to be watching to cut through a lot of the noise out there around some of these indicators.”

The content of this News Brief is of general interest and is not intended to apply to specific circumstances. It should not be regarded as legal advice and not be relied upon as such. In relation to any particular problem which they may have, readers are advised to seek specific advice. © 2025 Zywave, Inc. All rights reserved.