2026 State of the Line Guide

Posted Date: May 12, 2026  

Introduction

NCCI’s annual State of the Line presentation provides an exclusive review of trends, cost drivers, and significant developments shaping the workers compensation (WC) industry. This State of the Line Guide provides a slide-by-slide examination of the key insights, data sources, and formulas underlying the State of the Line presentation.

As you review the information contained in this Guide, it may be useful to keep in mind the following market indicators and trends that NCCI’s 2026 State of the Line presentation highlighted:

  • Workers compensation net written premium decreased –0.2% in 2025
  • The 2025 calendar year combined ratio for workers compensation is 91%, a sign of underwriting profitability for the system
  • Workers compensation’s 2025 accident year combined ratio is 102%
  • NCCI estimates a redundant industry reserve position of $14B
  • Lost-time claim frequency declined by 2% in 2025, a more moderate decline than the long-term average
  • Severity grew in 2025 with increases of 4% for medical claim severity and 4% for indemnity claim severity

P/C Results

Net Written Premium Growth

Key Insights

  • Total property and casualty net written premium for private carriers increased by 5.0% to $974.3 billion in 2025
  • Most lines of business experienced premium increases, the largest in magnitude being Homeowners, driven by large rate increases in 2025 throughout the country
  • Workers compensation had the only premium decrease compared to the other lines shown

Background

The net written premium in this slide provides a measure of the size of each major line of business in the property and casualty (P/C) insurance industry.

Data

  • National Association of Insurance Commissioners (NAIC) Annual Statement data for individual carriers prior to consolidation of affiliated carriers
  • Insurance Expense Exhibit Part II—Allocation to Lines of Business Net of Reinsurance

The values for the most recent year are preliminary because the NAIC may still receive additional data submissions.

Net Combined Ratio (by Year)

Key Insights

  • Calendar Year 2025 is the second consecutive year with a P/C industry combined ratio below 100% and has the lowest combined ratio since 2006
  • Private carriers produced an underwriting gain in 11 of the 21 years displayed, including 6 of the last 10 years
  • The 20-year average combined ratio is 100%

Background

This slide displays a long-term history of the net combined ratios for the total P/C industry. A combined ratio is the sum of the loss ratio, loss adjustment expense (LAE) ratio, dividend ratio, and underwriting expense ratio. The loss, LAE, and dividend ratios are calculated as ratios to earned premium. The underwriting expense ratio is calculated as a ratio to written premium to provide a better match of the timing of the numerator and denominator.

Data

  • NAIC’s Annual Statement data: 2005–2008 and 2013–2025p
  • Insurance Services Office: 2009–2012

The value for the most recent year is preliminary because the NAIC may still receive additional data submissions.

Combined ratios in the underlying table are in percentages.

Net Combined Ratio

Key Insights

  • The total P/C combined ratio was 93% for private carriers in 2025
  • Declines in the Personal Auto and Homeowners combined ratios continue driving the decline in the total P/C combined ratio
  • Workers Compensation continues to be among the P/C lines that have above-average levels of underwriting profitability, with a combined ratio of 91% in 2025

Background

The calendar year net combined ratios in this slide measure the overall performance of each line of business and the P/C industry as a whole. See the Background section of Net Combined Ratio (by Year) for more information.

Data

  • NAIC’s Annual Statement data for individual carriers prior to consolidation of affiliated carriers
  • Insurance Expense Exhibit Part II—Allocation to Lines of Business Net of Reinsurance

The values for the most recent year are preliminary because the NAIC may still receive additional data submissions.

WC Premium

Net Written Premium

Key Insights

  • The net written premium for private carriers remained at $41.6 billion for 2025
  • Total net written premium, including state funds, was $45.6 billion

Background

This slide displays WC net written premium by year, separately for private carriers and state funds.

In the context of the State of the Line presentation, NCCI’s definition of state funds includes only those carriers that are both members of the American Association of State Compensation Insurance Funds and largely exempt from paying federal income taxes. All other carriers are included in the private carrier values.

Data

  • NAIC’s Annual Statement data
  • Insurance Expense Exhibit Part II—Allocation to Lines of Business Net of Reinsurance

The values for the most recent year are preliminary because the NAIC may still receive additional data submissions.

Premium values in the underlying table are in billions of dollars.

Residual Market Premium

Key Insight

  • Premium in the NCCI-serviced pools has exhibited a downward trend over the last 10 years, after peaking at around $1.15 billion in 2015. The magnitude of the downward trend has slowed in recent years, and the Policy Year 2025 premium volume, at about $640 million, represents a slight decrease compared to 2024.

Background

Insureds unable to obtain coverage in the voluntary market can secure coverage through the Residual Market Pool in participating states. The estimated ultimate premium for all Residual Market Pools serviced by NCCI is displayed by policy year.

Data

  • Pool data for all NCCI-serviced WC Residual Market Pool states, valued as of 12/31/2025
  • Tennessee Reinsurance Mechanism premium is not included
  • NCCI’s Residual Market Quarterly Results

Residual market premium values in the underlying table are in billions of dollars.

Residual Market Share

Key Insight

  • The residual market share continued to decline through 2025, and it is now approximately 5%

Background

The graph displays by calendar year the Residual Market Pool and direct assignment premium for all NCCI-serviced Residual Market Pool states as a percentage of total WC market premium.

Data

  • Pool and direct assignment data for all NCCI-serviced WC Residual Market Pool states valued as of 12/31/2025
  • NCCI’s Residual Market Management Summary

Residual market shares in the underlying table are in percentages.

Direct Written Premium Change

Key Insights

  • Between 2024 and 2025, the aggregate change in NCCI and independent bureau private carrier direct written premium was a decrease of 1.8%
  • The changes in direct written premium this year are moderate, with decreases seen across many states

Background

Underlying the change in the private carrier direct written premium volume are the changes in premium volume by individual jurisdiction. The percentage changes depicted on the map exclude monopolistic fund states. Orange represents premium volume increases, while blue represents premium volume decreases. The deeper colors represent larger magnitudes of change.

Data

  • NAIC’s Annual Statement Statutory Page 14 for calendar year written premium by state

Direct written premium changes in the underlying table are in percentages.

Changes in Payroll by Component

Key Insights

  • Payroll increased by about 5% in 2025, but with less than 1% growth from employment most growth came from wages
  • Only the Health Care sector meaningfully contributed to employment growth in 2025
  • Wage growth was strong across many sectors

Background

The change in payroll from 2024 to 2025 is broken down into changes in employment and wage rate.

Data

Combined Office is an aggregation of several sectors: Information, Financial Activities, and Professional and Business Services. All Other includes the Other Services, Private Education, and the Logging and Mining sectors.

  • US Bureau of Labor Statistics
  • US Bureau of Economic Analysis
  • NCCI

Values in the underlying table are in percentages.

Change in Combined Impact of Schedule Rating, Dividends, and Rate/Loss Cost Departure

Key Insights

  • The year-over-year change in the combined impact of schedule rating, dividends, and rate/loss cost departure was –0.4% in 2025, a departure from the roughly 1% per year increase observed over the past several years
  • The change in the latest policy year of –0.4% is mostly driven by a decrease in schedule rating

Background

Schedule rating, dividends, and departure from bureau level loss costs/rates are the carrier-driven components to overall premium. This slide shows the year-over-year change in the combined impact of these components based on private carrier data for all jurisdictions where NCCI provides ratemaking services.

Data

  • NAIC’s Annual Statement Statutory Page 14
  • NCCI’s Financial Call data

Values in the underlying table are percentages of year-over-year change.

Direct Written Premium Change by Component

Key Insights

  • For NCCI states, private carrier direct written premium volume decreased by 2.0% between Calendar Years 2024 and 2025
  • The decrease in Loss Cost & Mix was mostly offset by the increase in payroll

Background

This slide provides the major components impacting the overall change in private carrier direct written premium for all states where NCCI provides ratemaking services.

The Other Factors category may include changes in audit impacts, average experience mod, deductible credit types or amounts, mix of policy types, or mix between private carrier and either state fund or self-insured markets.

Data

  • Direct written premium change: NAIC’s Annual Statement Statutory Page 14
  • Components: NCCI’s Policy Data

Approved Changes in Bureau Loss Cost Level

Key Insight

  • Written premiums are expected to decrease by an average of 5.0% from 2025 to 2026 as a result of loss cost/rate changes in approved NCCI filings

Background

As of May 1, 2026, the bureau premium level changes shown here reflect the approved changes in advisory rates, loss costs, and assigned risk rates as filed in jurisdictions where NCCI provides ratemaking services.

The percentage changes by state, which reflect the impact on written premium (from one year to the next) due to NCCI filing activity, are weighted using calendar year direct written premium as reported to the NAIC. The changes shown reflect several factors that impact NCCI filings, including variations in claim frequency and severity, fluctuations in the economy, cost containment initiatives, legislative reforms, and judicial decisions. Texas is included beginning with Calendar Year 2011 and West Virginia beginning with Calendar Year 2008.

This methodology reflects the effective date of each state’s filing when determining the impact on written premium from one year to the next.

Data

  • NCCI
  • NAIC’s Annual Statement Statutory Page 14

The value for the most recent year is preliminary because there may be additional filing approvals with effective dates in 2026.

Approved changes in bureau premium level in the underlying table are in percentages.

Most Recent Changes in Bureau Loss Cost Level

Key Insights

  • The most recent filings resulted in decreases for nearly every NCCI state
  • The changes range from –15.6% to +21.6%, where the large increase in Nevada stands out against the vast majority of decreases
  • There were three double-digit decreases filed in 2026, which is the same number as those filed in 2025

Background

This slide displays the most recent filed changes (approved and pending) in voluntary market advisory rates or loss costs in each jurisdiction where NCCI provides ratemaking services as of May 1, 2026. Law-only filings are not included in this analysis.

In the slide, orange represents premium level increases, while blue represents premium level decreases. The deeper colors represent larger magnitudes of change.

Data

Changes in bureau premium level in the underlying table are in percentages.

Cumulative Trauma by Proportion of Claim Counts

Key Insights

  • The share of lost-time claims attributable to cumulative trauma injuries has remained stable in NCCI states since 2013
  • Cumulative trauma injuries are becoming more common in California
  • Cumulative trauma injuries are more common in California than in NCCI states; as of the latest year, the prevalence is approximately 26% in California compared to 3% in NCCI states

Background

The share of cumulative trauma claims is calculated as the ratio of cumulative trauma lost-time claims to total lost-time claims, by accident year. Claims are considered to involve cumulative trauma if the primary medical diagnosis is carpal tunnel syndrome, or if the claim is reported with either a nature of injury code or loss condition loss code corresponding to a cumulative trauma injury.

Claim counts are valued as of 1st Unit Statistical report (i.e. six months after policy expiration) and have not been developed to ultimate.

Data

  • NCCI’s Workers Compensation Statistical Plan data for Accident Years 2012–2024 at 1st Report and NCCI’s Medical Data Call; includes all states where NCCI provides ratemaking services except Texas
  • Workers Compensation Insurance Rating Bureau of California (WCIRB), April 2026 Actuarial Committee meeting

The value for the most recent accident year is preliminary because additional Unit Statistical reports may be submitted to NCCI and WCIRB.

Values in the underlying table are in percentages.

Cumulative Trauma—2022 to 2024

Key Insights

  • The share of lost-time claims attributable to cumulative trauma injuries is between 1% and 6% in NCCI states over the latest three years
  • Cumulative trauma injuries are more common in California than in NCCI states
  • Cumulative trauma injuries make up approximately 22% of lost-time claims in California over the latest three years

Background

The share of cumulative trauma claims is calculated as the ratio of cumulative trauma lost-time claims to total lost-time claims, by accident year. Claims are considered to involve cumulative trauma if the primary medical diagnosis is carpal tunnel syndrome, or if the claim is reported with either a nature of injury code or loss condition loss code corresponding to a cumulative trauma injury.

Claim counts are valued as of 1st Unit Statistical report (i.e. six months after policy expiration) and have not been developed to ultimate.

Data

  • NCCI’s Workers Compensation Statistical Plan data for Accident Years 2022–2024 at 1st Report and NCCI’s Medical Data Call; includes all states where NCCI provides ratemaking services
  • Workers Compensation Insurance Rating Bureau of California, April 2026 Actuarial Committee meeting

The value for the most recent accident year is preliminary because additional Unit Statistical reports may be submitted to NCCI and WCIRB.

Values in the underlying table are in percentages.

WC Results

Net Combined Ratio

Key Insights

  • The 2025 private carrier combined ratio of 91% marks the twelfth consecutive year of underwriting gains
  • The 2025 combined ratio, despite being the highest since 2016, translates to a 9-point underwriting gain, a metric of significant profitability

Background

This slide shows workers compensation combined ratios. See the Background section of Net Combined Ratio (by Year) for more information.

Data

  • NAIC’s Annual Statement data for individual carriers prior to consolidation of affiliated carriers
  • Insurance Expense Exhibit Part II—Allocation to Lines of Business Net of Reinsurance

The value for the most recent year is preliminary because the NAIC may still receive additional data submissions.

Combined ratios in the underlying table are in percentages. Data for private carriers and state funds combined is also included for informational purposes, but these values are only shown going back to 2011 due to data availability.

Net Combined Ratio by Component

Key Insights

  • The dividends and loss adjustment expense ratios are relatively consistent with last year’s respective values. There was a slight increase in the underwriting expense and loss ratios.
  • This is the ninth consecutive year with a loss ratio under 50%

Background

This slide shows the components of the workers compensation calendar year net combined ratios. The loss ratios in this slide compare net incurred losses to net earned premium. The loss ratio is the largest component of the combined ratio. The loss adjustment expense (LAE) ratio compares net incurred LAE to net earned premium. LAE includes both defense and cost containment expenses (DCCE) and adjusting and other expenses (AOE). The underwriting expense ratio compares the costs associated with writing insurance to net written premium. The underwriting expenses included in the ratio are:

  • Commission and brokerage expenses
  • Taxes, licenses, and fees
  • Other acquisition expenses
  • General expenses

Policyholder dividends is the smallest component of the combined ratio and are compared to net earned premium.

Data

  • NAIC’s Annual Statement data for individual carriers prior to consolidation of affiliated carriers
  • Insurance Expense Exhibit Part II—Allocation to Lines of Business Net of Reinsurance

The values for the most recent year are preliminary because the NAIC may still receive additional data submissions.

Values in the underlying table are in percentages.

Investment Gain on Insurance Transactions

Key Insights

  • The preliminary WC investment gain on insurance transactions decreased slightly to 9% in 2025
  • This ratio is slightly below the WC long-term average of 11.3%, but it is relatively consistent with recent years

Background

The overall investment gain is allocated by line of business according to the NAIC-prescribed allocation procedure.

The WC investment gain on insurance transactions (IGIT) ratio measures investment performance by comparing investment income allocated to the WC line of business to WC earned premium.

Data

  • NAIC’s Annual Statement data for individual carriers prior to consolidation of affiliated carriers
  • Insurance Expense Exhibit Part II—Allocation to Lines of Business Net of Reinsurance

The value for the most recent year is preliminary because the NAIC may still receive additional data submissions.

Investment gain ratios in the underlying table are in percentages.

Pretax Operating Gain

Key Insights

  • A 9% investment gain ratio combined with a 9% underwriting gain resulted in an 18-point operating gain in 2025
  • The 18% gain in 2025 represents the lowest value since 2016, but it remains above the long-term average of 15.2%

Background

The pretax operating gain on this slide measures the overall financial performance of the workers compensation line by incorporating both underwriting and investment income. Pretax operating gain excludes direct changes to surplus, including, but not limited to, changes in:

  • Unrealized capital gains
  • Unrealized foreign exchange gain
  • Net deferred income tax
  • Nonadmitted assets
  • The provision for reinsurance
  • Surplus notes

Data

  • NAIC’s Annual Statement data for individual carriers prior to consolidation of affiliated carriers
  • Insurance Expense Exhibit Part II—Allocation to Lines of Business Net of Reinsurance

The value for the most recent year is preliminary because the NAIC may still receive additional data submissions.

Pretax operating gains in the underlying table are in percentages. Data for state funds is included for informational purposes.

Net Combined Ratios—AY As Reported vs. NCCI’s Selections

Key Insights

  • NCCI’s Selections is the level to which NCCI believes each accident year (AY) will develop over time
  • For each of the latest five AYs, the difference between the NCCI-selected and carrier-reported combined ratios is 5 to 6 percentage points, which corresponds to approximately a $2B difference for each AY

Background

In this slide, NCCI’s selected net combined ratios are compared to reported private carrier workers compensation net combined ratios. The values are shown for the most recent 10 years on an accident year (AY) basis. Each AY combined ratio reflects the loss experience on accidents as of the latest data evaluation date. See the Background section of Net Combined Ratio (by Year) for more information.

Data

  • NAIC’s Annual Statement, Schedule P—Part 1D
  • Insurance Expense Exhibit Part II—Allocation to Lines of Business Net of Reinsurance

Combined ratios in the underlying table are in percentages.

Emergence of Reported WC Net Loss and LAE Ratios

Key Insights

  • The carrier-reported Loss and LAE ratios at the initial valuation for the last 10 AYs have been around 70%–72%
  • In between the line segments are the reserve releases (emergence), which reflect the cumulative changes in the reported Loss and LAE ratios from the initial valuation to the current valuation for each AY

Background

The net incurred loss and LAE ratio is calculated as the ratio of accident year (AY) net incurred losses and LAE to calendar year (CY) net earned premium. The AY net loss and LAE ratios change with each valuation as loss experience matures.

For each AY, the light orange lines represent the carrier-reported net loss and LAE ratios as of the initial valuation (the first year-end valuation for each corresponding AY). The dark orange lines represent the current valuation of the carrier-reported net loss and LAE ratios.

Data

  • NAIC’s Annual Statement, Schedule P—Part 1D

Net loss and LAE ratios in the underlying table are in percentages.

Net Loss and LAE Ratios—AY As Reported vs. NCCI’s Selections

Key Insights

  • For each AY displayed, NCCI believes the current As Reported AY results will decline over time. As AYs mature, we have seen convergence in the NCCI-selected and in the As Reported values, and this pattern is expected to continue.
  • The AY 2025 As Reported Loss and LAE ratio is 5 points higher than the NCCI-selected ratio, and that difference has been steadily decreasing from the 11 point difference in AY 2022 for each of the past three AYs at 1st Report.
  • AY 2025 Loss and LAE ratios are higher than AY 2024. The Loss and LAE ratios for the latest valuation have increased since AY 2023 and have increased significantly since 2016.

Background

The accident year (AY) net incurred loss and LAE ratio is calculated as a ratio of AY net losses and LAE to CY earned premium. The values in this slide compare NCCI selections to those reported at the latest valuation by private carriers.

For a given AY, a deficiency occurs when NCCI’s selected net loss and LAE ratio is higher than the reported value by carriers; a redundancy occurs when NCCI’s selected net loss and LAE ratio is lower than the value reported by carriers.

Data

  • NAIC’s Annual Statement, Schedule P—Part 1D

Net loss and LAE ratios in the underlying table are in percentages.

Net Loss and LAE Reserve Adequacy

Key Insights

  • The private carrier reserve adequacy for year-end 2025 changed to –$14B (i.e., a $14B redundancy). This dollar redundancy represents 12% of the total carried reserves from NAIC’s Annual Statement Page 3.
  • The CY reserve releases more than offset the additional redundancy for AY 2025, and this is the second consecutive year-end valuation where the magnitude of the overall workers compensation reserve redundancy decreased.

Background

The net reserve adequacy is the dollar difference (in billions) between NCCI’s estimate of net loss and LAE reserves and the reported private carrier net loss and LAE reserves.

The overall workers compensation net reserve adequacy is combined for all AYs at each year-end valuation and considers all reserve discounts as deficiencies.

A positive value on this slide indicates an overall reserve deficiency.

A negative value on this slide indicates an overall reserve redundancy.

Data

  • NAIC’s Annual Statement, Schedule P—Part 1D

Redundancies and deficiencies in the underlying table are in billions of dollars.

WC Loss Drivers

Loss Drivers by Industry—2023 to 2024p

Key Insights

  • Construction is the largest industry by premium volume (27%); it saw the largest decrease in frequency (nearly –7%) between Accident Year 2023 and Accident Year 2024
  • Two industries, Office and Health Care, experienced mild increases in frequency across the same period
  • The Accident Year 2024 increase in lost-time medical severity was driven mostly by the Construction industry due to its size the and the magnitude (+13%) of its change in severity
  • Changes in lost-time medical and indemnity claim severity vary across other industries, representing a range of increases and decreases—although there is more variation across medical than indemnity

Background

This slide displays industry-level changes in frequency (reported lost-time claims per million dollars of pure premium) and severity between Accident Year 2023 and Accident Year 2024 at a first report for all jurisdictions where NCCI provides ratemaking services. Premium is adjusted to current wage and voluntary pure premium levels. Large-deductible policies are excluded.

Data

  • NCCI’s Statistical Plan data; excludes COVID-19 claims

Claim Frequency—Construction

Key Insights

  • Construction frequency, when measured relative to pure premium, is generally lower than other industries. This is a by-product of the generally higher loss costs/rates for construction classes, which reflect the higher potential for costly injuries compared to other industries.
  • Decreases in Construction frequency have outpaced all other industries in Accident Year 2024 and across the past ten years.

Background

This slide displays industry-level changes in frequency (reported lost-time claims per million dollars of pure premium) between Accident Year 2015 and Accident Year 2024 at a first report for all jurisdictions where NCCI provides ratemaking services. Premium is adjusted to current wage and voluntary pure premium levels. Large-deductible policies are excluded.

Data

  • NCCI’s Statistical Plan data; excludes COVID-19 claims

Claim Frequency—Top Construction Classes

Key Insights

  • By drilling down into top classification codes (based on premium volume) within the Construction industry, we can observe which classes experienced increases or decreases in claim frequency from Accident Year 2023 to Accident Year 2024
  • Frequency decreased for each of the 10 largest Construction classes, and 8 of the top 10 classes saw a larger decrease in frequency than the average across all industries

Background

This slide displays Construction classification-level changes in frequency (reported lost-time claims per million dollars of pure premium) between Accident Year 2023 and Accident Year 2024 at a first report for all jurisdictions where NCCI provides ratemaking services. Premium is adjusted to current wage and voluntary pure premium levels. Large-deductible policies are excluded.

Data

  • NCCI’s Statistical Plan data; excludes COVID-19 claims

Claim Frequency—Health Care

Key Insights

  • Health Care is, on average, a higher frequency industry
  • Decreases in Health Care frequency across Accident Years 2015 to 2024 have been fairly in line with the average across all industries combined
  • Health Care frequency experienced a slight increase in Accident Year 2024

Background

This slide displays industry-level changes in frequency (reported lost-time claims per million dollars of pure premium) between Accident Year 2015 and Accident Year 2024 at a first report for all jurisdictions where NCCI provides ratemaking services. Premium is adjusted to current wage and voluntary pure premium levels. Large-deductible policies are excluded.

Data

  • NCCI’s Statistical Plan data; excludes COVID-19 claims

Claim Frequency—Office

Key Insights

  • Office is, on average, a lower frequency industry
  • Decreases in Office frequency have outpaced most other industries
  • In Accident Year 2020, Office experienced a notable drop in frequency because many Office jobs moved to a remote-work environment due to the COVID-19 pandemic
  • Following a rebound in Accident Year 2021, Office frequency has continued to decline; however, the industry experienced a slight increase in frequency in Accident Year 2024

Background

This slide displays industry-level changes in frequency (reported lost-time claims per million dollars of pure premium) between Accident Year 2015 and Accident Year 2024 at a first report for all jurisdictions where NCCI provides ratemaking services. Premium is adjusted to current wage and voluntary pure premium levels. Large-deductible policies are excluded.

Data

  • NCCI’s Statistical Plan data; excludes COVID-19 claims

Claim Frequency

Key Insights

  • NCCI estimates that lost-time claim frequency for Accident Year 2025 will be 2% lower than that for Accident Year 2024
  • Accident Year 2025 reflects a more moderate decrease in frequency compared to the three previous accident years, along with the long-term average annual change of –3.8%
  • NCCI expects that the long-term downward trend in frequency is likely to continue

Background

This slide displays changes in frequency (lost-time claims per million dollars of pure premium) for all jurisdictions where NCCI provides ratemaking services. The year-to-year changes are based upon matched states.

Frequency is defined as lost-time claim counts (developed to an ultimate basis) per million dollars of premium. Premium is adjusted to current wage and voluntary pure premium levels. Data is valued as of 12/31/2024. However, Accident Year 2025 is based on preliminary data valued as of 12/31/2025. Accident Years 2010–2011 and 2019–2024 show adjusted values, primarily due to significant changes in audit activity. All years exclude large-deductible policies.

Data

  • NCCI’s Financial Call data; excludes COVID-19 claims through 7/1/2023

Values in the underlying table are in percentages.

Medical Claim Severity—Construction

Key Insights

  • Construction has the highest lost-time medical claim severity across all industries
  • Cumulative increases in Construction medical severity across Accident Years 2015 to 2024 have been fairly in line with the average across all industries combined
  • Construction medical severity increased considerably (+13%) in Accident Year 2024, putting upward pressure on the above-average increase in overall medical severity observed across all industries combined

Background

This slide displays industry-level changes in lost-time medical claim severity between Accident Year 2015 and Accident Year 2024 for all jurisdictions where NCCI provides ratemaking services. Severity represents medical paid plus case for lost-time claims divided by lost-time claims at a first report. Large-deductible policies are excluded.

Data

  • NCCI’s Statistical Plan data; excludes COVID-19 claims

Medical Claim Severity—Top Construction Classes

Key Insights

  • Medical Severity in the Construction industry increased by 13% between Accident Year 2023 and 2024
  • Over half of the top 10 Construction classes saw double-digit increases in medical severity, while three Construction classes saw severity decreases

Background

This slide displays Construction classification-level changes in lost-time medical claim severity between Accident Year 2023 and Accident Year 2024 at a first report for all jurisdictions where NCCI provides ratemaking services. Severity represents medical paid plus case for lost-time claims divided by lost-time claims at a first report. Large-deductible policies are excluded.

Data

  • NCCI’s Statistical Plan data; excludes COVID-19 claims

Medical Claim Severity

Key Insight

  • NCCI estimates that the average medical lost-time claim severity for Accident Year 2025 will be about 4% higher than that for Accident Year 2024

Background

This slide displays average lost-time medical claim severity based on data for all jurisdictions where NCCI provides ratemaking services. Accident years prior to 2011 exclude Texas and prior to 2015 exclude West Virginia. All years exclude large-deductible policies. Severity represents ultimate medical losses divided by ultimate lost-time claim counts. Data is valued as of 12/31/2024. However, Accident Year 2025 is based on preliminary data valued as of 12/31/2025.

Data

  • NCCI’s Financial Call data; excludes COVID-19 claims through 7/1/2023

The underlying table shows two lost-time medical claim severity values for Accident Years 2011 and 2015. Accident Year 2011 is restated to exclude Texas in order to match the states in Accident Year 2010. Accident Year 2015 is restated to exclude West Virginia in order to match the states in Accident Year 2014. This restatement ensures that each year’s severity change is based on the same group of states.

Medical Claim Severity vs. WCWMI

Key Insights

  • Indexing to 2014 allows a clearer view of when medical severity growth began to accelerate, following a period of flat severity that started in 2009.
  • From Accident Year 2014 to Accident Year 2021 average medical severity increased approximately 7% over a period of seven years. For comparison, NCCI’s Workers Compensation Weighted Medical Price Index (WCWMI) increased 11% over the same period.
  • In more recent years, greater-than-average changes in medical severity have been outpacing changes in comparable price indices.

Background

This slide compares the growth in average lost-time medical claim severity with the growth in the Workers Compensation Weighted Medical Price Index (WCWMI) from 2014 to 2025. The WCWMI is a proxy for medical care price inflation that responds to changes in the blend of different medical services over time. Both the average lost-time medical claim severity and the WCWMI trend lines are indexed to 2014. All years exclude large-deductible policies.

The WCWMI is a composition of medical cost components from the Producer Price Index and the Consumer Price Index, reweighted using our Medical Call data to better match the mix of spend in workers compensation.

Data

  • Lost-time medical claim severity is derived from NCCI’s Financial Call data; excludes COVID-19 claims through 7/1/2023
  • Workers Compensation Weighted Medical Price Index (WCWMI) is derived from NCCI’s Medical Data Call and the US Bureau of Labor Statistics’ Producer Price Index and Consumer Price Index

Change in Cost, Utilization, and Price per Claim—2023 to 2024

Key Insights

  • Increases in cost across all medical cost categories contributed to the 6% increase in overall medical cost per claim between Accident Year 2023 and 2024
  • The change in average medical utilization per claim accounted for 4% of the change in cost per claim, while changes in price accounted for 2%
  • The increase in inpatient utilization had the largest impact on overall utilization, driven by a 6% increase in the share of claims with an inpatient stay

Background

This slide shows the 2023–2024 change in medical cost per claim, broken down by price and utilization across medical cost categories.

Data

NCCI’s Medical Data Call

Lost-time claims, excludes large-deductible policies; based on services through 12/31 of the year following the year in which the accident occurred.

Includes all states where NCCI provides ratemaking services

Change in Cost, Utilization, and Price per Claim—2024 to 2025p

Key Insights

  • Increases in cost across all medical cost categories contributed to the 6% increase in overall medical cost per claim between Accident Year 2024 and 2025
  • The change in price and utilization per claim both contributed 3% to the overall change in cost per claim
  • While the price change was slightly higher than in past years, the change in average utilization per claim still drove half of the overall cost increase

Background

This slide highlights how the 2024–2025 change in medical cost per claim breaks down between price and utilization by medical cost category.

Data

NCCI’s Medical Data Call

p Preliminary, based on medical payments made in the same year in which the accident occurred and was reported to NCCI prior to April 1 in the subsequent year

Lost-time claims, excludes large-deductible policies

Includes all states where NCCI provides ratemaking services

Medical Price Changes by Medical Cost Category

Key Insights

  • Excluding Florida brings the price changes for overall medical services, including physician and inpatient services, more in line with the Workers Compensation Weighted Medical Price Index (WCWMI)
  • Florida significantly increased physician fee schedule amounts in 2025, resulting in about a 35% price increase in physician services in the state
  • Florida implemented an inpatient fee schedule in 2023 with fixed caps limiting the year-over-year price increases for inpatient services

Background

This slide shows the overall price change as well as the price change by medical cost category from NCCI’s Medical Transaction Data compared to the price changes indicated by NCCI’s WCWMI.

Data

WC Weighted Medical Price Index: 2022–2025 US Bureau of Labor Statistics (BLS)

Component Weights: NCCI’s Medical Data Call

Price from Medical Transaction Data: NCCI’s Medical Data Call

p Preliminary, based on medical payments made in the same year in which the accident occurred and was reported to NCCI prior to April 1 in the subsequent year

Lost-time claims; excludes large-deductible policies

Includes all states where NCCI provides ratemaking services

Indemnity Claim Severity

Key Insights

  • NCCI estimates that the average indemnity cost per claim for Accident Year 2025 will be about 4% higher than that for Accident Year 2024
  • Accident Years 2022–2025 each saw larger-than-average increases in indemnity severity. The larger-than-average changes are primarily driven by increased wages, which have risen significantly in recent years

Background

This slide displays average lost-time indemnity claim severity based on data for all jurisdictions where NCCI provides ratemaking services. Accident Years prior to 2011 exclude Texas and prior to 2015 exclude West Virginia. All years exclude large-deductible policies. Severity represents ultimate indemnity losses divided by ultimate lost-time claims. Data is valued as of 12/31/2024. However, Accident Year 2025 is based on preliminary data valued as of 12/31/2025.

Data

  • NCCI’s Financial Call data; excludes COVID-19 claims through 7/1/2023

The underlying table shows two indemnity severity values for Accident Years 2011 and 2015. Accident Year 2011 is restated to exclude Texas in order to match the states in Accident Year 2010. Accident Year 2015 is restated to exclude West Virginia in order to match the states in Accident Year 2014. This restatement ensures that each year’s severity change is based on the same group of states.

Indemnity Claim Severity vs. Wage Inflation

Key Insights

  • The change in indemnity claim severity has historically tracked relatively closely with the change in average wage
  • Since 2020, wage growth has exceeded the historical average, leading to increased indemnity claim costs

Background

This slide compares the growth in average indemnity claim severity with the growth in average weekly wages from 2005 to 2025. An adjustment to average weekly wages between 2008 and 2011 compensates for exceptional volatility in bonuses for the financial sector during these years. The year-to-year severity changes are based on data for unmatched states. The year a state is first included in the data may influence the countrywide severity change from the prior year. Both the WC average indemnity claim severity and average weekly wage trend lines are indexed to 2005. All years exclude large-deductible policies.

Data

  • Indemnity severity is derived from NCCI’s Financial Call data; excludes COVID-19 claims through 7/1/2023
  • US Average Weekly Wage is based on Quarterly Census of Employment and Wages (QCEW) data from the US Bureau of Labor Statistics (BLS) for 2005–2007, 2012–2019, and 2022–2024; NCCI and QCEW for 2008–2011 and 2020–2021; and BLS, the US Bureau of Economic Analysis (BEA), and NCCI for 2025p

Values in the underlying table are in percentages.

Total Claim Severity

Key Insights

  • Combining lost-time indemnity and lost-time medical severities into total claim severity shows that average total claim severity has increased since Accident Year 2005—by about +2% per year on average
  • These severity values have not been adjusted to a common wage level

Background

This slide displays average total lost-time claim severity based on data for all jurisdictions where NCCI provides ratemaking services. Accident years prior to 2011 exclude Texas and prior to 2015 exclude West Virginia. All years exclude large-deductible policies. Severity represents ultimate indemnity and medical losses for lost-time claims divided by ultimate lost-time claims. Data is valued as of 12/31/2024. However, Accident Year 2025 is based on preliminary data valued as of 12/31/2025.

Data

  • NCCI’s Financial Call data; excludes COVID-19 claims through 7/1/2023

The underlying table shows two total lost-time severity values for Accident Years 2011 and 2015. Accident Year 2011 is restated to exclude Texas in order to match the states in Accident Year 2010. Accident Year 2015 is restated to exclude West Virginia in order to match the states in Accident Year 2014. This restatement ensures that each year’s severity change is based on the same group of states.

Wage-Adjusted Total Claim Severity

Key Insights

  • Average wage-adjusted total lost-time claim severity values are calculated by applying a wage adjustment to the loss amounts in previous accident years in order to bring those losses to a common wage level.
  • On a wage-adjusted basis, total lost time claim severity is lower than in AY 2005 and has exhibited a long-term downward trend, although the last decrease observed was in 2021.
  • Between Accident Years 2005 and 2025, wage inflation (+3% per year on average) has outpaced total lost-time claim severity growth (+2% per year on average). The net effect is a decline in wage-adjusted total lost-time claim severity of approximately 1% per year on average.

Background

This slide displays average wage-adjusted total lost-time claim severity based on data for all jurisdictions where NCCI provides ratemaking services. Accident Years prior to 2011 exclude Texas and prior to 2015 exclude West Virginia. All years exclude large-deductible policies. Severity represents ultimate indemnity and medical losses for lost-time claims, adjusted to a current wage level and divided by ultimate lost-time claims. Data is valued as of 12/31/2024. However, Accident Year 2025 is based on preliminary data valued as of 12/31/2025.

Data

  • Total severity is derived from NCCI’s Financial Call data; excludes COVID-19 claims through 7/1/2023
  • US Average Weekly Wage is based on Quarterly Census of Employment and Wages (QCEW) data from the US Bureau of Labor Statistics (BLS) for 2005–2007, 2012–2019, and 2022–2024; NCCI and QCEW for 2008–2011 and 2020–2021; and BLS, the US Bureau of Economic Analysis (BEA), and NCCI for 2025p

The underlying table shows two total lost-time severity values for Accident Years 2011 and 2015. Accident Year 2011 is restated to exclude Texas in order to match the states in Accident Year 2010. Accident Year 2015 is restated to exclude West Virginia in order to match the states in Accident Year 2014. This restatement ensures that each year’s severity change is based on the same group of states.

Loss Ratio

Key Insight

  • When frequency and severity are combined, the overall impact to the average loss ratio in 2025 is –3%, compared to the long-term average of –4.5%

Background

This slide displays the change in average lost-time loss ratios based on data for all jurisdictions where NCCI provides ratemaking services. Premium for Accident Years prior to 2007 excludes Texas and prior to 2012 excludes West Virginia. Losses for Accident Years prior to 2011 exclude Texas and prior to 2015 exclude West Virginia. All years exclude large-deductible policies. Loss ratio represents estimated ultimate indemnity and medical losses for lost-time claims divided by pure premium. Data is valued as of 12/31/2024. However, Accident Year 2025 is based on preliminary data valued as of 12/31/2025.

Data

  • NCCI’s Financial Call data; excludes COVID-19 claims through 7/1/2023

Loss Drivers by Carrier—(-30%,+30%)

Key Insights

  • A majority of the percentage changes are concentrated between –30% and +30%
  • There is considerable variation across all carrier groups

Background

This slide shows the distribution of changes in lost-time claim frequency (reported lost-time claims per million dollars of pure premium), indemnity severity, and medical severity by carrier group between Accident Year 2024 and Accident Year 2025 at a first report for all jurisdictions where NCCI provides ratemaking services.

Premium is adjusted to current wage and voluntary pure premium levels. Data is valued through 12/31/2025 and large-deductible policies are excluded. A carrier group’s frequency value is represented in the chart by a circle whose size is based on the carrier group’s premium volume up to $300 million.

Data

  • NCCI’s Financial Call data

Loss Drivers by Carrier—(100M+)

Key Insights

  • Carrier groups with over $100M premium across NCCI jurisdictions on average experienced a similar change in frequency as the average for all carrier groups combined—around –2% across Accident Years 2024 and 2025. Notably, 100% of these carriers were within +/–15% of the average –2% frequency.
  • Together these carrier groups saw smaller increases in severity when compared to the averages for all carrier groups combined; individually, however, these carriers saw a wide range of increases and decreases. About 82% of these carriers were within +/–15% of the average –4% indemnity severity, and about 89% were within +/–15% of the average –4% medical severity.

Background

This slide shows the distribution of changes in lost-time claim frequency (reported lost-time claims per million dollars of pure premium), indemnity severity, and medical severity by carrier group between Accident Year 2024 and Accident Year 2025 at a first report for all jurisdictions where NCCI provides ratemaking services.

Premium is adjusted to current wage and voluntary pure premium levels. Data is valued through 12/31/2025 and large-deductible policies are excluded. A carrier group’s frequency value is represented in the chart by a circle whose size is based on the carrier group’s premium volume up to $300 million.

Data

  • NCCI’s Financial Call data

Loss Drivers by Carrier—(50M,100M)

Key Insights

  • Carrier groups with between $50M and $100M premium across NCCI jurisdictions on average experienced a change in frequency similar to the average for all carrier groups combined—around –2% across Accident Years 2024 and 2025. About 79% of these carriers were within +/–15% of the average –4% frequency.
  • In aggregate, these carrier groups saw larger increases in severity (especially indemnity) when compared to the averages for all carrier groups combined; individually, however, these carriers saw a wide range of increases and decreases. About 48% of these carriers were within +/–15% of the average –4% indemnity severity, and about 55% were within +/–15% of the average –4% medical severity.
  • These carrier groups saw a similar level of concentration around the mean frequency change as carriers with $100M+ premium, but greater variability around the mean for both severities.

Background

This slide shows the distribution of changes in lost-time claim frequency (reported lost-time claims per million dollars of pure premium), indemnity severity, and medical severity by carrier group between Accident Year 2024 and Accident Year 2025 at a first report for all jurisdictions where NCCI provides ratemaking services.

Premium is adjusted to current wage and voluntary pure premium levels. Data is valued through 12/31/2025, and large-deductible policies are excluded. A carrier group’s frequency value is represented in the chart by a circle whose size is based on the carrier group’s premium volume up to $300 million.

Data

  • NCCI’s Financial Call data

Appendices

Appendix A—Definitions

Accident Year (AY)—A loss accounting term for experience that is summarized by the calendar year in which an accident occurred.

Adjusting and Other Expenses (AOE) Incurred—Loss adjustment expenses, other than those categorized as Defense and Cost Containment Expense. Examples:

  • Fees of adjusters and settling agents (but not if engaged in a contentious defense)
  • Attorney fees incurred in the determination of coverage, including litigation between the insurer and the policyholder

Assigned Carrier—The insurer assigned to provide residual market coverage to an eligible employer that has applied for workers compensation insurance under NCCI’s Workers Compensation Insurance Plan. An assigned carrier can be either a Servicing Carrier or direct assignment carrier.

Calendar Year (CY)—A method of accounting that includes all financial transactions occurring during a 12-month period, beginning January 1.

Commissions and Brokerage Expenses Incurred—Fees paid to producers.

Defense and Cost Containment Expense (DCCE) Incurred—Expenses for defense by the insurer in contentious situations (whether a first-party or third-party claim) for litigation involving a claim and for cost containment expense. Examples:

  • Surveillance expenses
  • Fixed amounts for cost containment expenses
  • Case management expenses for managing the overall cost of a claim
  • Litigation management expenses
  • Fees or salaries for appraisers, private investigators, hearing representatives, reinspectors, and fraud investigators, if working in defense of a claim
  • Attorney fees incurred owing to a duty to defend
  • Cost of engaging experts

Direct Assignment—Assigned risk business written and serviced directly by an insurance company that has been authorized by the insurance department to write such business. These policies are written without reinsurance through the National Workers Compensation Reinsurance Pooling Mechanism or other reinsurance pool.

Dividends to Policyholders—When actual costs and expenses are less than anticipated costs and expenses, carriers may opt to return the difference to policyholders in the form of a dividend.

Earned Premium—The proportional share of each policy’s written premium applicable to the expired part of the policy—derived by subtracting the change in the unearned premium reserve from the written premium.

Estimated Annual Premium—Premium charged by an insurance company, at the time the policy is issued, for coverage provided by an insurance contract for a period of time. Estimated premium is reported before endorsements or audits.

Experience Mod—A factor calculated from actual case loss experience used to adjust an insured’s manual premiums (up or down) based on the insured’s loss experience relative to the average underlying the manual premiums. It compares the insured’s experience to the average class experience.

Exposure Accident Year (EAY):

  • Claims/Losses—Are on an accident-year basis
  • Earned Premium—Final audited premium for each policy is allocated to the appropriate calendar year based on the period of exposure

General Expenses Incurred—Overhead expenses incurred in the insurer’s operations, other than those included in the other expense categories. Examples:

  • Salaries
  • Rent and rent items
  • Equipment

Net Written Premium—The gross premium income adjusted for additional or return premiums, including any additions for reinsurance assumed and deductions for reinsurance ceded.

Other Acquisitions, Field Supervision, and Collection Expenses Incurred—Expenses incurred in obtaining insurance business. Examples:

  • Salaries
  • Equipment
  • Advertising
  • Employee relations and welfare
  • Allowance to managers and agents
  • Postage, telephone, and express
  • Rent and rent items

Policy Year (PY)—The year of the effective date of the policy. Policy year financial results summarize experience for all policies with effective dates in a given calendar year period.

Pure Premium—The portion of bureau-level premium that provides for indemnity and medical loss payments.

Residual Market Pool—A financial agreement among participating insurers to share in the experience of certain assigned risks. This reduces both administrative costs and annual fluctuations in the liability of participating insurers resulting from the operation of state insurance plans.

Servicing Carrier—An insurer, other than a direct assignment carrier, authorized to receive Plan assignments and provide coverage to eligible employers on behalf of insurance company members of the National Workers Compensation Reinsurance Association NFP (NWCRA)—or participants in other reinsurance pooling mechanisms—incorporated as a part of the Plan in a state.

Servicing Carrier Allowance—The ceding commission retained by a Servicing Carrier as compensation for the expenses of servicing an employer under a Workers Compensation Insurance Plan or similar program.

Taxes, Licenses, and Fees Incurred—State taxes, assessments, and miscellaneous fees. Examples:

  • Premium taxes
  • Second Injury Fund assessments
  • General administration funds
  • Guaranty funds

Unearned Premium Reserve—The proportional share of each policy’s written premium applicable to the unexpired part of the policy.

Workers Compensation Insurance Plan (WCIP or Plan)—A program established and maintained by NCCI and approved by state insurance regulatory authorities whereby workers compensation insurance may be secured by eligible employers unable to secure such coverage in the voluntary market.

Appendix B—Formulas

After-Tax Return on Surplus \[ =\frac{\small\text{Net Income}}{\small\text{Average Surplus}} \]

Average Surplus \[ =\small\text{0.5 x (Surplus as regards policyholders, December 31 current year} \\ \small\text{ + Surplus as regards policyholders, December 31 prior year)} \]

Combined Ratio \[ =\small\text{Loss Ratio + LAE Ratio + Dividend Ratio + Underwriting Expense Ratio} \] Combined Ratio (Residual Market Slides) \[ =\frac{\small\text{Losses}}{\small\text{Earned Premium}} + \frac{\small\text{Expenses and Allowances}}{\small\text{Written Premium}} \]

Dividend Ratio \[ =\frac{\small\text{Dividends to Policyholders}}{\small\text{Earned Premium}} \]

Indicated Net Loss & LAE Reserves \[ =\small\text{Ultimate Net Loss & LAE – Net Loss & LAE Payments} \]

Investment Gain on Insurance Transactions (IGIT) Ratio \[ =\frac{\small\text{Investment Gain on Funds Attributable to Insurance Transactions + Other Income Less Other Expenses}}{\small\text{Earned Premium}} \]

Investment Gain Ratio \[ =\frac{\small\text{Net Investment Gain (Loss)}}{\small\text{Earned Premium}} \]

Loss Adjustment Expense (LAE) Ratio \[ =\frac{\small\text{DCCE Incurred + AOE Incurred}}{\small\text{Earned Premium}} \]

Loss & LAE Ratio \[ =\frac{\small\text{Incurred Loss + DCCE Incurred + AOE Incurred}}{\small\text{Earned Premium}} \]

Loss Ratio \[ =\frac{\small\text{Incurred Loss}}{\small\text{Earned Premium}} \]

Net Earned Premium \[ =\small\text{Net Written Premium + Change in Unearned Premium Reserve} \]

Net Reserve Adequacy \[ =\small\text{NCCI Indicated Net Loss & LAE Reserves – Private Carrier Net Loss & LAE Reserves As Reported} \]

Premium-to-Surplus Ratio \[ =\frac{\small\text{Net Written Premium}}{\small\text{Surplus as regards policyholders}} \]

Pretax Operating Gain \[ =\small\text{1 – (Combined Ratio – Investment Gain on Insurance Transactions Ratio)} \]

Underwriting Expense Ratio \[ =\frac{ \begin{bmatrix} \begin{align} & \small\text{Commissions and Brokerage Expenses Incurred} \\ & \small\text{+ Taxes, Licenses, and Fees Incurred} \\ & \small\text{+ Other Acquisitions, Field Supervision, and Collection Expenses Incurred} \\ & \small\text{+ General Expenses Incurred} & \end{align} \end{bmatrix} } {\small\text{Written Premium}} \]