Workers' Comp 2019: Sixth Straight Year of Underwriting Profits Amidst Economic Shifts

Underwriting Profits Continue Despite Slight Decline

Private workers compensation insurers experienced a slight dip in profitability in 2019 compared to their record-breaking 2018 performance, according to a preliminary analysis by the National Council of Compensation Insurance (NCCI). The combined ratio, a measure of insurer profitability, is estimated to be around 87 percent for 2019, making it the second-lowest in recent history after last year's record-low 83.2 percent.

Net Premiums Written Show Decline

Workers' compensation net premiums written (NPW) fell by 3.9 percent in 2019, dropping to $41.6 billion from $43.3 billion in 2018. The decline in NPW can be attributed to the Base Erosion Anti-Abuse Tax (BEAT) component of the Tax Cuts and Jobs Act of 2017, which limited multinational corporations' ability to shift profits from the United States by making tax-deductible payments to affiliates in low-tax countries. This led to a nearly 9 percent growth in NPW in 2018, but the residual effect of BEAT and the strong economy were not enough to counterbalance the recent decreases in rates and loss costs in 2019.

Impact of Rate/Loss Cost Changes

Changes in rates and loss costs significantly impact premium growth and reflect various factors affecting system costs, such as economic changes, cost containment initiatives, and reforms. NCCI anticipates a 10 percent average decrease in premiums for 2019 due to rate/loss cost filings made in jurisdictions for which NCCI provides ratemaking services. The State of the Line Report, which presents these findings, was discussed at NCCI's Annual Issues Symposium (AIS) in May.

For readers, it's crucial to stay informed about the economic and regulatory shifts that can impact workers' compensation premiums and overall profitability. Keeping an eye on reports like NCCI's State of the Line Report can provide valuable insights into these trends.