We are pleased to summarize key year-end 2024 financial results for U.S. workers’ compensation writers based on data available from S&P Global Market Intelligence. Milliman’s composite of workers’ compensation writers includes 40 companies or groups of companies, each with workers’ compensation direct written premium (DWP) of more than $310 million in 2024. This selected composite represents nearly 80% of the total workers’ compensation DWP volume for the industry in 2024. The metrics we reviewed show a modest decrease to DWP following three straight years of growth, a deterioration in the calendar year loss and defense and cost containment expense (DCCE) ratios relative to year-end 2023, a continuation of the persistent favorable development of prior accident years’ loss ratios, and a steady increase in policyholders’ surplus (PHS).
As displayed in the following tables and commentary, recent experience for workers’ compensation has been favorable. However, the social and economic environment has changed, and these changes could have a material impact on future workers’ compensation premium and losses. Some of these specific changes include increased medical inflation, higher wage inflation, the implementation of robotics and artificial intelligence (AI) in workplace safety programs, evolving legislation regarding coverage of independent contractors in the gig economy, and new definitions for coverage of workplace-related mental injuries. Because workers’ compensation is a long-tail line of business, the current environment could substantially influence prior-year losses. Therefore, workers’ compensation experience will need to be continually monitored.
It should be noted that the data for this composite of insurers have been aggregated to reflect any historical acquisitions, such that the historical data are on a basis similar to the current data.
DWP growth drops slightly
After three straight years of rising workers’ compensation DWP, the industry saw a modest drop in DWP in 2024. The lower DWP volumes in 2020 and 2021 can be primarily attributed to lower employment during the height of the pandemic. The increase in premium during 2022 was due to increased employment as the economy recovered from the pandemic, as well as increased wages due to inflation. As these effects eased gradually in 2023, so did the increase in total DWP. Other lines of business have seen recent increases in DWP due in part to rate increases in the last few years; however, workers’ compensation writers continue to see neutral or decreasing rate action driven by ongoing favorable frequency trends and wage trends offsetting medical and indemnity severity trends leading to a decrease in DWP in 2024, the first since 2020. Figure 1 displays the total workers’ compensation DWP for this composite, along with the percentage change from the prior year.
Figure 1: Top 40 workers’ compensation writers – direct written workers’ compensation premium ($ billions)
Loss ratios show a mixed bag of results
The countrywide workers’ compensation 2024 direct calendar year loss and DCCE ratio (CYLR) for the industry was 54.5%, a slight deterioration from the 52.1% observed in 2023. The deterioration in CYLR in 2024 was driven by a slightly higher initial accident year loss ratio in 2024 compared to 2023. Figure 2 shows the workers’ compensation CYLRs for each of the last five years on a countrywide basis and for several of the largest states, noting that the administration of workers’ compensation insurance varies by state (i.e., bureau rates, administered pricing, monopolistic states). While countrywide data suggest an increase in CYLR from 2023 to 2024, some large states did observe a decrease. When assessing the 15 largest states (based on 2024 direct earned premium), nine states saw a lower CYLR in 2024 compared to 2023.
Figure 2: Workers’ compensation total industry – direct CYLR
Note: December 31, 2024, data for Pennsylvania State Workers’ Insurance Fund not available at time of publication.
As displayed in Figure 3, the workers’ compensation accident year net ultimate loss and loss adjustment expense (LAE) ratios for this composite have developed favorably from the initial booked estimates for each of the prior four accident years. The initial estimate for accident year 2024 is 71.9%, which is the highest initial estimate for an accident year net ultimate loss and LAE ratio in the last three years. However, this is about 3.5% lower than the initial estimates for the pandemic-influenced accident years 2020 and 2021. It is likely that the initial estimates for accident years 2020 and 2021 were influenced by uncertainty associated with the pandemic, including potential slowdowns in payments, treatments, and changes in the economy. The median accident year loss ratio for 2024 is 72.0%, with the middle 50% of companies in this composite between 64.5% and 79.7%.
Figure 3: Top 40 workers’ compensation writers – accident year net ultimate loss and LAE ratio by annual statement (AS) year
Prior-year favorable reserve development continues to outpace industry
Figure 4 compares this composite’s ratio of one-year reserve development to net earned premium for workers’ compensation to all lines of business excluding workers’ compensation. All lines of business have seen moderate movement in the last five years in either direction for this cohort. Meanwhile, workers’ compensation has seen double-digit favorable one-year reserve development for each of the last five years, significantly outpacing reserve development for other lines of business as insurers release redundancies. Workers’ compensation is a long-tail line of business with considerable uncertainty in future trends, especially medical inflation, changes in medical care, and life expectancies, where changes to any or all these factors could influence future reserve development.
Figure 4: Top 40 workers’ compensation writers – one-year reserve development
Figure 5: Top 40 workers’ compensation writers – net IBNR to case ratios by AS year
To further assess whether the favorable reserve development might continue, it is useful to look at the incurred but not reported (IBNR) to case reserve ratios over time. When initially looking at the ratio from AS year 2024 in Figure 5, one might draw the conclusion that the current year reserves are less adequate than prior years, as the IBNR to case ratio is notably lower than past years. However, when the IBNR was restated to reflect the favorable reserve runoff shown in Figure 5, the hindsight IBNR to case ratios are more consistent by accident year, as shown in Figure 6. This may imply that the current reserves are adequate and that future favorable development on recent accident years may be less pronounced than it was in prior years.
Figure 6: Top 40 workers’ compensation writers – hindsight net IBNR to case ratios by accident year
PHS eclipses $600 billion
PHS for this composite increased by 4.4% in 2024, a slight ease from 2023’s increase of 7.7%. The decrease in PHS during 2022 can primarily be attributed to changes in macroeconomic factors, such as rising inflation, which led to prominent levels of unrealized capital losses for the entire industry. The upticks in PHS during 2023 and 2024 can largely be credited to a substantial rise in investment income due to the rising financial markets. Many of the companies included in this composite write multiple lines of business, therefore it should not be inferred that the change in PHS for this composite is a direct result of workers’ compensation experience. Figure 7 displays the total PHS for this composite, along with the percentage change from the prior year.
Figure 7: Top 40 workers’ compensation writers – PHS ($ billions)
Workers’ compensation in 2025 and beyond
The 2024 statutory financial results for workers’ compensation overall reflect continued stability and favorable results; however, there are some indications potentially suggesting a tempering of favorable expectations in the future, including modest declines in DWP, some deterioration in loss ratios, and possibly less favorable reserve development in the near term. Looking ahead, evolving economic conditions, technological advancements, and legislative changes will continue to influence workers’ compensation, presenting new challenges and opportunities. It is important for companies to not become complacent with the favorable results in recent years but rather continue to carefully monitor emerging trends in order to sustain industry stability in the future.