Workers’ Compensation Results Continue to Improve: A.M. Best

The workers’ compensation industry’s results continued a favorable trend in 2013, marking it the third consecutive year of improvement in the industry’s underwriting performance.

The industry’s combined ratio declined to 98.6, an 11.7-point decrease from 2012 and the lowest calendar year combined ratio since 2006. Even setting aside the benefit of one-time items related to reforms in New York’s workers’ compensation laws, 2013’s results reflect modestly better core underwriting performance and may warrant some optimism for solid results ahead, this according to a Best’s Special Report titled “U.S. Workers’ Compensation Results Sustain Recent Improvement.”

While the sustained positive rate environment has benefited underwriting performance, the aggregated results for the workers’ compensation line of business as reported by all companies and state funds on Insurance Expense Exhibits filed with A.M. Best faces familiar challenges as the competitive market environment and persistent low investment yields compress operating margins. Although uncertainty remains over the impact of health care reform, there have been positive indications during the past two years that further improvement in results may lie ahead over the near term. Written premiums increased for the third straight year, improvement in the combined ratio has continued and the reduction in claims frequency has largely offset the increase in claims severity.

Operating results for A.M. Best workers’ compensation composite—which consists of individual companies whose book of business is primarily workers’ compensation and includes results for all lines of business written for those companies—also improved in 2013. The improvement was driven by lower underwriting losses and a reduction in underwriting expenses, mainly due to a one-time adjustment related to New York reform legislation and solid, but declining, investment earnings.

Source: A.M. Best