Fitch Sees WC Profit Decline, Weaker Pricing

Fitch Ratings said Thursday that workers’ compensation is the strongest performing major commercial product line in the U.S. property and casualty (P/C) industry.
WC has seen nine consecutive years of underwriting profits and an average combined ratio of 91% from 2015-2023, including an 88% CR in 2023.
The long-term trend of declining claims frequency and stable loss severity trends are key factors behind this success, Fitch said.
Weaker pricing will likely push combined ratios toward the mid-90s or higher in the next two years.
The extended period of WC profits comes as the segment has recognized substantial annual reserve redundancies as calendar-year reserve development has exceeded 12% of subsector earned premiums for seven consecutive years (2017-2023).
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Oregon’s SAIF board of directors announced a $60 million policyholder dividend on Wednesday.
It is the 15th consecutive year of pay-outs, according to the fund’s statement.
Some 51,288 policyholders will receive the dividend to be distributed in October and will be calculated based on the premium for policies that ended in 2023.
“After careful consideration of the uncertainty in the current economic landscape and medical trends, we believe offering this dividend to our policyholders is the appropriate thing to do,” said Chip Terhune, president and CEO of SAIF.
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Permanent partial disability injuries account for approximately 50% of all WC costs, with impairment ratings playing a key role in most states, according to research published Wednesday by NCCI.
The research sought to provide a better understanding of what determines impairment ratings and generate insights into claim costs.
The report found the average whole-body impairment rating is 6.5% while the average time to maximum medical improvement (MMI) for claims identified as permanent partial is 363 days.
The average impairment rating varies by state, ranging from about 4% to approximately 11%.
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