At its
Annual Insights Symposium (AIS) in May 2025, NCCI presented the
State of the Line Report—a comprehensive assessment of the workers compensation (WC) insurance line of business. The results presented in that report reflect the most current data available at the time, including NCCI’s preliminary estimates for Calendar Year (CY) 2024.
This report provides both updated results for 2024 and an early look at 2025.
Key Insights
Final workers compensation private carrier countrywide results:
- CY 2024 net written premium (NWP) decreased from 2023 by 3.2% (to $41.6 billion)
- The CY 2024 combined ratio was 86.1%, and the operating gain was 23.7%
Updated preliminary claim frequency and severity estimates for NCCI states:
- Accident Year (AY) 2024 claim frequency is expected to be 6% lower than 2023. The latest estimate is lower than the initial –5%
AIS estimate.
- AY 2024 indemnity claim severity is estimated to be 5% higher than 2023, which is slightly lower than the initial +6%
AIS estimate. The estimated AY 2024 medical lost-time claim severity increase remains at +6%.
While still early and subject to revision, preliminary analysis for private carriers through the second quarter of 2025 shows:
- CY 2025 direct written premium (DWP) decreased 1.9%, compared with the first half of 2024
- The CY 2025 direct loss ratio is 50%, two points higher than the first half of 2024
- The line is expected to have another strong year with continued underwriting gains in 2025 and a net premium volume similar to that observed in CY 2024
2024 in Review
For CY 2024, the final written premium net of reinsurance is $41.6 billion for private carriers. This is unchanged from the NWP estimate presented at
AIS 2025 and represents a 3.2% decrease from 2023.
For CY 2024, NCCI previously estimated a WC net combined ratio of 86%. Updated industry data indicates a net combined ratio of 86.1%, a 13.9% underwriting gain.
The CY 2024 combined ratio marks the eighth consecutive year under 90% and the eleventh consecutive year of underwriting gains. The current period of consecutive underwriting gains is unprecedented in terms of both duration and magnitude and is reflective of a prolonged soft market in the
underwriting cycle.
The WC investment gain on insurance transactions (IGIT) measures investment performance by comparing investment income allocated to the WC line of business with the corresponding earned premium. At
AIS 2025, the IGIT for CY 2024 was estimated to be 10% of net earned premium. Updated industry data indicates a ratio of 9.8%, which is below the long-term average but higher than the prior two years.
The WC pretax operating gain measures the overall performance of the WC line of business, reflecting both underwriting and investment income. The CY 2024 underwriting gain of 13.9%, combined with the investment gain of 9.8%, resulted in an operating gain of 23.7%. This value is similar to the preliminary estimate of 24%, shared at
AIS 2025, and marks the eighth consecutive operating gain exceeding 20%, representing the most profitable period over at least the last 30 years.
Overall, workers compensation exhibited strong performance in 2024 with a combined ratio well below that of the total property and casualty (P/C) industry. The table below summarizes the final CY 2024 private carrier combined ratios by line of business.
At
AIS 2025, NCCI shared that WC lost-time claim frequency
declined by 5% in AY 2024, while both indemnity and medical lost-time severity had each
increased by 6% in AY 2024. These figures represent NCCI’s initial estimates based on the latest information available at the time and are denoted as preliminary (p).
NCCI’s preliminary estimates are subject to change because the Financial Call data that is initially reported in April of each year is continually validated and analyzed throughout each ratemaking season. Final frequency and severity results are published the following spring after all NCCI filings have been submitted. The waterfall graphs below illustrate how updates to various components of the analysis—based on the latest available information—impact the results.
Based on the latest available data and assumptions, NCCI expects the frequency change from AY 2023 to AY 2024 to be approximately one percentage point lower than initially estimated. This change is primarily due to the use of more recently updated premium on-level factors underlying each of NCCI’s proposed or approved filings. Although wage inflation assumptions have also been updated across individual states, the net impact across all states combined is negligible. There have been no changes to the premium audit adjustment factors since the initial analysis for
AIS 2025 and only minimal changes due to updated industry data.
NCCI also expects the indemnity severity change from AY 2023 to AY 2024 to be approximately one percentage point lower than initially estimated. While updated industry data and other data adjustments have resulted in negligible overall impact, the general emergence of claims and losses—in coordination with NCCI’s selected development factors—have slightly reduced this estimate. Ultimate indemnity severity for AY 2023 has increased by more than one percentage point since the prior valuation as of 12/31/2023, putting downward pressure on the change across AY 2023–2024.
Although the initial estimate for AY 2024 medical lost-time severity was higher than recent history and has sparked much interest, the latest available information indicates the +6% medical severity increase that was revealed at
AIS 2025 remains unchanged. While updates to industry data, loss emergence, and development have brought the initial estimate down some, these decreases have been entirely offset by the impact of other data adjustments. These other adjustments include the application of factors that remove losses associated with medical-only claims in order to isolate the medical costs of lost-time claims.
2025 in Sight
For the 2025 preliminary analysis of WC results, NCCI used National Association of Insurance Commissioners (NAIC) Quarterly Statement data, which is only available on a direct (of reinsurance) basis. To infer how the quarterly data may develop by year end, a review of the quarterly data alongside year-end direct and net of reinsurance values was performed. In the graph below, changes in cumulative DWP by quarter from one calendar year to the next are paired with changes in NWP at year end.
Countrywide, NAIC private carrier DWP decreased 1.9% through the first half of 2025, compared with the first half of 2024. This decrease is similar to the –1.8% change observed through the first quarter of 2025. Considering the 2025 results to date, the year-end NWP change will likely be in the vicinity of zero, resulting in 2025 NWP close to the $41.6 billion figure observed in 2024. This estimation is a reasonable possibility, assuming DWP develops similarly to historical patterns and the relationship between direct and net premium holds consistent.
Because premium is calculated as payroll times rate, the combined impact of the changes in those components drives the overall change in premium. NCCI expects the impact of rate/loss cost level changes on premium to decrease in 2025 by about 6%, on average, as a result of recent rate/loss cost filings. Factors contributing to this decrease include the wage-sensitive exposure base (payroll) in WC, as well as declines in lost-time claim frequency and moderate changes in claim severity.
For more information on the notable decreases in bureau level changes over the last several years, please see
Understanding Loss Cost Actions, by Nadege Bernard.
Changes in other factors also contribute to a final rate change, such as changes in schedule rating, dividends, rate/loss cost departure, average experience rating modification, deductible credits, or mix of policies. The impact of these factors cannot yet be estimated, but over the last several years these factors combined have put upward pressure on premium.
Further offsetting bureau premium level decreases, payroll through the first half of 2025 increased by about 5.0% over the prior year (sources: US Bureau of Labor Statistics; US Bureau of Economic Analysis; NCCI). This increase is driven by a 1.0% increase in employment level paired with a 4.0% increase in wage rate.
In analyzing the profitability of the line in 2025, NCCI reviews the countrywide combined ratio results. The combined ratio is the sum of the loss, expense, and dividend ratios. The private carrier direct loss ratio for the first half of 2025 is 50%, which is two points higher than the direct loss ratio observed through the first half of 2024.
In the graph below, we can see a consistent pattern where the loss ratio at year end tends to be slightly lower than the loss ratio at second quarter. For example, at the end of 2024, the direct loss ratio was 47%, about a point lower than the loss ratio through the second quarter. Also notice that the year-end net and direct loss ratios have been similar in recent years.
We cannot predict future outcomes with any certainty, but if we assume similar development in 2025, the net loss ratio will be in a similar range as the 2024 result.
NAIC Quarterly Statement data does not contain expenses by line of business. Therefore, NCCI makes the additional assumption that WC expense ratios (including dividends) for 2025 are based on a three-year average of the expense ratios from CY 2022 through CY 2024. Note that while the expense ratios are not expected to change significantly from year to year, there is the potential for some variability, which is accounted for in this year’s estimate. Based on the range of values in recent years, it seems reasonable that the total CY 2025 expense ratios could deviate from the three-year average by about one percentage point.
With these assumptions in place, it is reasonable to expect that the 2025 year-end net combined ratio will be similar to that of 2024 and likely range from 85% to 93%, as displayed below. This would result in 12 years of WC calendar year combined ratios under 100%.
Overall, the workers compensation industry continues to exhibit signs of strong performance in CY 2025.
Next spring, join us for
AIS 2026, where our full-year view of 2025 results will be presented.
AIS 2026 is scheduled for May 11–13, 2026.
Notes
This document includes assumptions and projections. As with any prospective analysis, there exists estimation uncertainty in these assumptions and projections. Areas of this analysis subject to estimation uncertainty that could have a material impact on the results include:
- The development of Second Quarter 2025 DWP, Direct Earned Premium, and Direct Incurred Loss to year-end values
- The relationship between direct and net business
- The expected expense ratios
- The impact of changes to laws and regulations
This article is provided solely as a reference tool to be used for informational purposes only. The information in this article shall not be construed or interpreted as providing legal or any other advice. Use of this article for any purpose other than as set forth herein is strictly prohibited.