NCCI has a unique role in gathering and analyzing data about the workers compensation system. At our recent
Annual Insights Symposium 2024 , we shared the latest key performance metrics, research, and analysis, and looked ahead to key issues and questions we must address.
Remarkable Results
As NCCI Chief Actuary Donna Glenn said at our symposium, the workers compensation system is in an era of extraordinary strength. A key factor in this is the steady and consistent decline in claim frequency. For two decades, claim frequency has declined at an average annual rate of 4% with 2023 showing an 8% reduction, due in large part to a continuous commitment to workplace safety. I’d be remiss if I did not also mention the industry’s commitment to addressing the opioid crisis, which impacted system costs and worker outcomes for too long.
Other performance metrics reflecting the
state of the industry:
- Workers compensation premium increased by 1% in 2023, the lowest among property/casualty lines
- The combined ratio increased slightly to 86%, the seventh straight year below 90
- Reserves remain robust with an estimated redundancy of $18 billion at year-end 2023
- Severity changes were moderate for 2023 with increases of 2% for medical claim severity and 5% for indemnity claim severity, in line with wage increases
The workers compensation line is also benefiting from a
growing economy and stabilizing labor market, according to NCCI Senior Economist Stephen Cooper. Labor market churn has slowed significantly. Employment in 2023 expanded 2.3% and wages also increased 3.9%, supporting premium growth.
However, stakeholders have told us they’re concerned about how medical inflation, the economy, and the labor market will affect workers compensation in the years ahead. They also have lingering concerns about the steady decline in rates and loss costs, according to our
recent survey. At the crux of these concerns is rate adequacy and the long-term health of the system.
Keeping a Watchful Eye
The workers compensation system is healthy, in part, because it is a mature system with a long history and familiar risks. NCCI has collected and analyzed workers compensation data for more than a century, and we’ve seen the industry deliver remarkable results for a prolonged period.
As I see it, to sustain the system’s health, we must continue to innovate and keep a watchful eye on key industry drivers, trends, insights, and emerging issues . NCCI experts are breaking new ground in our analysis and actively monitoring the market for specific trends that may disrupt and even improve the system.
For example, we’ve launched a deep dive into frequency trends in the Construction, Manufacturing, Transportation, and Retail industries.
Our new research shows that construction claim frequency is dropping nearly twice as fast as the average across all industries. Conversely, the research also shows that frequency rose dramatically for couriers and messengers, which was caused by a wave of small severity claims.
We have also doubled down on our efforts to understand what is happening with medical inflation. It’s a factor that is top of mind for many industry stakeholders due to its ability to undermine years of careful planning and analysis.
Our
latest research shows that increases in medical paid cost per claim remain modest, at a 2% annual growth rate. We have also expanded our analysis by creating a timely new Workers Comp Weighted Medical Price Index (WCWMI) and
Medical Inflation Insights report, which delivers a quarterly look at medical inflation. This new resource provides stakeholders with insights into how overall medical prices for workers compensation are trending and when to dive deeper into the details.
Our research is enabled by our stakeholders—it is their significant commitment and investment to provide quality data that enables us to deliver tomorrow’s insights.
Healthy, Resilient, and Caring
These are my final months as NCCI’s leader. As I reflect on the past eight years, I am immensely proud of what we have accomplished together.
We have thoughtfully improved our delivery of timely analysis, impactful Thought Leadership, and practical benchmarking tools to stakeholders. We have made NCCI’s solutions even easier to use and our data more readily accessible. Of course, there is still much work to be done, but I am confident that NCCI is on course to help the workers compensation industry address whatever the future brings.
When the workers compensation system is at its best, it is healthy, resilient, and caring. Today, this is what we’re seeing, and we will continue to evolve and adapt to meet the needs of our stakeholders.
Together, we make a difference for injured workers and are there when they need us most.
It has been an honor to be part of NCCI and to support our industry’s noble mission.
Bill Donnell is President and CEO of the National Council on Compensation Insurance. He’s held this role since 2015 after decades as an underwriter and executive in insurance and reinsurance. Donnell plans to retire in early 2025.
Bill Donnell's op-ed is featured in Carrier Management. Access the full article
here.
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