The P&C business line that’s outperforming all others in the US

The workers’ compensation insurance sector remains the top performer in the US property & casualty industry, thanks to steady reductions in loss frequency and favorable reserve development trends, according to a new report by AM Best.

Titled “Workers’ Compensation Segment’s Winning Streak Continues,” the report highlights that, since 2015, the workers’ compensation segment has consistently been more profitable than any other commercial or personal insurance line. This ongoing success supports AM Best’s current stable outlook for the segment.

In 2023, the workers’ compensation line achieved a combined ratio of 88.7, outperforming the 10-year median of 91.5. This figure demonstrates the line’s resilience and efficiency compared to other P&C business lines.

Christopher Graham, an AM Best senior industry research analyst, noted: “Effective workplace safety initiatives of the past decade or more have helped control loss frequency, and, along with declines in fraud and in defense costs, have contributed to the line’s excellent underwriting margins.

“Equally as impressive, the workers’ compensation line’s net operating ratio was 14.5 points better than that of the industry.”

AM Best data from the end of 2023 reveals that workers’ compensation loss and loss adjustment expense (LAE) reserve development for older accident years was favorable by $6.9 billion. For comparison, prior-year development for the broader P&C industry was only favorable by $2.9 billion.

Other key findings from the report include: medical severity remains below the core consumer price index, contributing to positive loss development; although pricing in the workers’ compensation segment has declined for nine consecutive quarters, premium growth has been driven by factors such as rising wages and employment expansion, pushing net premiums above pre-pandemic levels.

It was also found that the market remains both competitive and profitable, with little disparity in direct premiums written among leading insurers. The top 25 insurers account for about 67% of total workers’ compensation business, which is considered relatively low compared to other insurance lines.

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