Workers Comp: A Profitable Niche Amidst Economic Uncertainties

Workers Compensation: A Profitable Niche

Workers compensation insurance has been a profitable niche in the property/casualty insurance industry, recording its sixth consecutive year of combined ratios under 90 and its ninth straight year of underwriting gains. The combined ratio, which represents the difference between claims and expenses paid and premiums collected by insurers, indicates an underwriting profit when below 100 and a loss when above 100.

Economic Trends and Payroll Growth

The Triple-I Issues Brief highlights how workers compensation has benefited from a generally strong economy, particularly strong growth in payrolls. Private employment surpassed its pre-pandemic level early in 2022, according to the U.S. Department of Labor’s Bureau of Labor Statistics, and employment growth remains faster than pre-pandemic norms. Payroll growth has been approximately 10 percent over the past two years.

Emerging Issues and Future Considerations

While current trends bode well for workers comp, the industry needs to recognize and be responsive to emerging issues. The impact of the pandemic, including the acceptance of remote work and the emergence of 'long COVID,' is one example. Additionally, mental-injury bills have seen a significant increase, with more than 75 considered in state legislatures year to date in 2023, compared to 14 in 2016.

For readers, it's crucial to stay informed about these emerging issues and their potential impact on workers compensation insurance. Understanding the broader economic trends and legislative changes can help in making informed decisions and anticipating future challenges.