workers' comp profitability

Despite the economic challenges from this past year due to COVID-19, the workers’ comp profitability is expected to make significant gains. Workers’ compensation insurance has been the most consistently profitable portion of the commercial lines marketplace in the U.S. in the last five years.

However, underwriting performance this year and beyond will likely start to slow, as claims activity normalizes following the pandemic’s slowing and with increased business activity. Other reports indicate that claims frequency is down significantly, connected to the slowdown in economic activity, with sharp downturns in employee time spent at an actual workplace.

In California, the state’s workers’ compensation rating bureau reported claims frequency compared to 2019, seeing a reduction quarter-to-quarter by as much as 10 percent for indemnity claims and 33 percent for medical-only claims.

COVID-related long-term claims have also seen reductions since the outbreak. However, uncertainty remains around longer-term health implications for more severe cases of the virus, including the potential for significant organ damage and other conditions that would ultimately increase workers’ compensation claims and costs.

Due to the sector’s prior profitability, workers’ compensation is the only major commercial lines segment not experiencing significant premium rate increases. Direct written compensation premiums in the first half of 2020 fell by about 9 percent compared to 2019. These volume declines are likely to continue to drop in the near term this year, with underwriting exposure reductions and effects from negative premium audits.

Negative premium rate pressure may end up pausing amid current economic uncertainty heading into the rest of 2021. Future premium volume will also lean heavily on the pace of the economy’s recovery, which is an ongoing debate topic on the federal government level. From stimulus deals to reopening businesses and lifting stay-at-home orders from state to state, workers’ compensation premiums depend heavily on what’s going on in the economy around it.

The strength of the economic recovery will also inject some influence into claims frequency levels moving forward. However, some of the wide socio-economic shifts in response to the virus outbreak may have a longer-term effect on workers’ compensation risks and costs of claims. Ultimately, time will tell how the pandemic and the slowly recovering economy will play into the workers’ compensation profitability outlook.

About InsureMyWorkComp & Their Workers Comp Solutions

InsureMyWorkComp is a digital brokerage that helps clients find the right workers’ compensation solution for their business needs, such as occupational accident insurance. Unlike other online platforms, we will help you to work with an agent who can provide you the right solution for your risk profile. Our staff has over 50 years of workers’ compensation underwriting and sales experience, and we are confident that we will provide you the support that you need. For more information or to get a quote, contact us today at (855) 340-9138.