The National Council on Compensation Insurance (NCCI) recently conducted its annual survey of insurance executives on top-of-mind issues in the workers compensation (WC) industry. The survey functions as a barometer of current industry sentiment and examines future challenges and opportunities. NCCI uses this extensive input to respond to the needs of its stakeholders in the workers compensation system.
The 2023 Carrier Executive Survey includes responses from 101 executives representing 98 companies, including the largest multiline, multistate carriers; as well as many smaller, regional, and single-line workers compensation insurers.
Insurers’ top concerns include rate adequacy, the shifting workplace and workforce, medical inflation, and economic uncertainty. While these results are somewhat consistent with NCCI’s recent surveys, executives also noted the emergence of new, complex topics that they are watching closely heading into 2024. This article connects what’s top of mind for carrier executives with current and relevant insights that NCCI delivers.
NCCI’s workers compensation data shows a strong and healthy system. NCCI expects a 2023 combined ratio under 100, which would be the 10th consecutive year of underwriting profitability. Several factors give it confidence in this assessment:
– – Claim frequency has steadily decreased for two decades. While data showed some volatility during the COVID-19 pandemic, 2022 returned to the long-term decline in claim frequency.
– – Medical severity has been moderate in recent years. Even over the last two years as inflation has climbed, price pressure on medical WC claims costs has been slow to rise. Additionally, fee schedules in most states are functioning well as a control mechanism for most categories of medical costs.
– – Wages have risen significantly since the pandemic and higher wages generally translate to higher indemnity payouts. However, because premiums are based on wages, higher indemnity costs are naturally offset by increasing premiums.
– – Strong employment and wages, declining loss frequency relative to premium, and moderate changes in claim severity all contribute to a continuation of declining loss costs.
Since 2019, workers compensation medical severity has grown at 1 percent annually. At the same time, medical indices show that price pressure is moderate, in the 2.5% to 3.5% range annually. That tells us that there are other factors in the mix offsetting overall increases in medical claim costs. The mix in medical conditions treated and the type and volume of medical services all contribute to changes in medical costs. In addition, as mentioned above, fee schedules in most states are functioning well as a control mechanism for most categories of medical costs. Projections from the Centers for Medicare & Medicaid Services (CMS) for the Personal Health Care index remain in the 2.5% to 3.5% range for 2024 through 2031.
NCCI’s Quarterly Economics Briefing – Q3 2023 indicates a shift toward a more balanced labor market, rather than a deteriorating labor market. Although employment growth has slowed, it still remains healthy, while wage growth remains elevated compared to the pre-pandemic levels, which in turn supports premium growth. The probability of a recession has diminished in the past quarter as consumer spending remains supported by strong employment levels, real income growth, further capacity for debt, and still-elevated excess savings.
NCCI pays close attention to the concerns voiced in its annual Carrier Executive Survey and through its myriad of daily interactions with carriers, regulators, and other key stakeholders. This input helps to shape its plans to bring additional value to the workers compensation system through a set of strategic initiatives: