By William Nibbelin, Senior Research Actuary, Triple-I
While personal auto and home insurance tend to be the focus of most insurance-related headlines, workers’ compensation has quietly become a model of stability and profitability. According to Triple-I’s latest Issues Brief, 2024 marked the third-best underwriting performance for the line in two decades, with a net combined ratio of 87.8.
That’s a full decade of underwriting profit for the industry. Since 2015, workers’ comp has consistently outperformed the property and casualty (P/C) insurance market. Combined ratio is the most common measure of insurer underwriting profitability. It is calculated by dividing the sum of the claim-related losses and expenses by premium. In its simplest form, a combined ratio under 100 means the insurer is making an underwriting profit; over 100 means the insurer is paying out more than it’s taking in.
The Jobs Engine and Premium Growth
Workers’ comp premiums are tied directly to the workforce. When more people work and wages rise, premiums generally follow. Only in 2020, because of the COVID-19 pandemic, employment numbers shrank in at least 15 years. Since 2020, the years 2021 through 2024 have seen the highest year-over-year increases in payroll in over two decades. However, premiums aren’t growing as fast as they are for other types of insurance, suggesting that the cost of coverage isn’t increasing though more people are working.
Safer Workplaces
Claims “frequency” — the measure of how often they happen — has been dropping steadily at an annual compound rate of -5.6 percent from 2015 to 2024, indicating work is getting safer. However, the “severity” of claims — the average cost of each claim — has been increasing.
When compared to the overall economy (GDP), however, the average cost of claims is decreasing. Therefore, the rising costs of individual claims are being driven more by general inflation in the economy than by workplace safety getting worse.
A More Competitive Market
One measure of industry competition is market concentration, which can be determined by the Herfindahl-Hirschman Index (HHI). The higher the index, the more market share is concentrated in fewer companies, implying less competition. The workers’ comp market has become much more competitive over the last 10 years. This is partly because states are moving away from government-run systems. For example, Missouri recently privatized its state fund in early 2025. Today, only 18 states have a competitive state fund. The direct combined ratio for fully privatized states has outperformed these states eight of the last 10 years. Fortunately, the direct written premium for these competitive funds as a percentage of total workers’ comp premium has dropped from 14.9 percent in 2015 to 12.9 percent in 2024.
Learn More:
NCCI Sees Underwriting Profitability Continuing for Workers Comp Line
NCCI AIS 2025: Key Insights on Workers Comp
Workers Comp Premium, Loss, Market Trends Support Its Ongoing Success