Workers comp renewals hold steady as line remains profitable

Businesses buying workers compensation coverage at the end of 2024 largely saw stable renewals with flat pricing as the line remains profitable for insurers.

A decade-long trend of lower frequency and severity of claims has contributed to an uncomplicated renewal environment that has persisted for several years, said Mark Moitoso, Atlanta-based executive vice president and risk practices leader at Lockton Cos. LLC

Experts have long feared that the aging workforce and rising medical costs would drive up claims costs. However, they say these predictions have not panned out, as any increases in costs have been offset by adequate pricing and increases in payroll. Medical inflation has also not kept up with overall market inflation.

The National Council on Compensation Insurance’s latest report, released Monday, found a strong labor market in almost every sector.

“While employment growth for the year was near pre-pandemic averages, wage growth remained elevated. This combination has kept growth in workers compensation payroll above pre-pandemic averages,” the Boca Raton, Florida-based organization said.

And the outlook remains stable.

“We don’t see anything big on the horizon … but we are always keeping our eyes on medical costs and medical inflation,” said Jeff Eddinger, senior division executive with NCCI, adding, “but we have not seen medical inflation react in workers comp.”

Daniel Aronson, New York-based managing director and U.S. casualty leader for Marsh LLC’s casualty practice, said that while there were concerns about increased claim activity during and following the COVID-19 pandemic, along with health care inflation, all that has stabilized.

“The actuaries have a really good handle on outcomes” in workers comp, he added.

Other factors stabilizing the market include predictive modeling, which is used to better manage claims outcomes, and policy changes such as the introduction of workers comp formularies, treatment guidelines and fee schedules to help manage the costs of treating injured workers, experts said.

Due to the line’s profitability, bundling workers comp coverage and other policies continues to be a trend, with “monoline work companies certainly having a slight competitive disadvantage to the multiline companies because of that leveraging,” Mr. Moitoso said.