January 16, 2024
Workers’ compensation rates continue to decrease
As rates for other lines of insurance climb, workers’ compensation rates are steadily decreasing.
“Consistent with recent years, we continue to see the rates in our core states of operation going down in 2024,” said SFM Business Development Specialist Cody Allen. “The latest workers’ comp rates throughout our territory currently range between -6.3% and -12%.”
Why are rates going down?
The explanation for this positive trend is simple – workers’ compensation claim frequency has declined for all but two of the past 20 years, according to the National Council on Compensation Insurance (NCCI).
There are a number of key reasons why we’ve seen reduced claim frequency over time, including:
Technological work practices: Employers have found ways to leverage automation, mechanical assistance and other technology to reduce the risk of injury for their employees.
Management practices: Employers are putting more energy and attention toward better hiring practices and return-to-work strategies.
Safety programs: Employers are also investing more in safety training and hazard reduction.
Meanwhile, medical utilization trends are also helping to control workers’ compensation losses. For example, moving toward more outpatient procedures and generic drugs has had a positive impact on medical costs.
The workers’ compensation industry has had significant reserve redundancies over the past five years, and is currently estimated at $17 billion, an all-time record, according to NCCI. The possible release of these reserves only improves carriers’ results.
The combination of claim reserves possibly being released, claim frequency continuing to decline, medical inflation remaining under control and payroll increases work together to drive rates down.
Future challenges to positive trends
There’s not necessarily an end in sight for these positive industry trends, but there are some future uncertainties that could be looming:
- An uncertain economic environment
- Labor challenges, including an aging workforce and competition for employees, which can lead to more turnover (newer employees often have a higher frequency of claims)
- An uptick in claim severity
- Wage, medical and social inflation
For more information on trends in workers’ compensation rates, see the NCCI State of the Line report for 2023 .
Originally published July 2023