U.S. workers compensation insurers were able to underwrite profitably between 2019 and 2022 even as significant changes occurred in the nation’s workforce due to the pandemic, according to a new report by the Insurance Information Institute.

“Overall, we see a healthy and strong workers compensation system,” said NCCI’s chief actuary, Donna Glenn, FCAS, MAAA. “Premiums written have returned to pre-pandemic levels, and claims frequency has resumed a long-term average decline.”

Workers comp net written premiums improved in 2022, with an 11.2 percent increase, compared with 8.4 percent for the overall industry.

Since 2014, workers compensation insurers cumulatively saw a net combined ratio of below 100 and, since 2017, that figure has consistently stayed below 90, with a 2022 net combined ratio of 87.4 for workers compensation insurers (when including state funds, in comparison to 84.0 for private carriers only). U.S. auto, home, and business insurers, across all insurance lines, had a net combined ratio last year of 102.4, according to Triple-I’s Issues Brief.

“Commercial lines achieved lower net combined ratios than personal lines in both 2021 and 2022, and we forecast that to continue through at least 2025,” said Dale Porfilio, FCAS, MAAA, chief insurance officer, Triple-I. “Workers comp had the lowest combined ratio among major product lines in 2021 and 2022, resulting from many years of deliberate efforts by insurance carriers and their policyholders to improve workplace safety.”

Claim frequency is the main cost driver in workers comp. Due to improved workplace safety and increased use of automation, frequency has been low – averaging 3 percent declines annually over the past 20 years. After an 8.3 percent decline in 2020, frequency rebounded by exactly the same amount in 2021, reflecting the impact of the pandemic and the subsequent recovery.

From 2019 to 2021, claim frequency fell slightly (0.7 percent), reflecting rises in the Manufacturing (5.2 percent) and Miscellaneous (6.7 percent) industry groups, offset by a 12.1 percent drop in the Office and Clerical group. Manufacturing and Miscellaneous – which includes package delivery, warehousing, and transportation – are groups that have seen a great deal of new hiring, so it’s possible these increases reflect accidents related to employee inexperience and insufficient training during the pandemic. The drop in Office and Clerical claim frequency almost certainly is due to the pandemicdriven rise in remote work. NCCI estimates that claim frequency for 2022 is consistent with the long-term downward trend.

Unlike claim frequency, medical and indemnity severity have increased about 60 percent over the past two decades. In 2022, indemnity severity rose 6 percent, and medical severity was up 5 percent.

Workers compensation has benefited from a generally strong economy in recent years, most notably due to the growth in payrolls, the Issues Brief states. Private employment surpassed its pre-pandemic level in 2022 and employment growth remains faster than pre-pandemic norms, according to the U.S. Department of Labor’s Bureau of Labor Statistics.

Improved workplace safety, coupled with more employers allowing remote work arrangements, have combined to drive down the number of workers compensation insurance claims filed annually since 2021, Triple-I found. Moreover, many states have medical fee schedules, reducing medical inflation as insurers and medical providers set fixed prices for the services and products needed by injured workers.