Workers’ Compensation Still the Steadiest of the P&C Lines
Workers’ compensation remains a profit leader across the property and casualty insurance market, with 2025 poised to produce another year of underwriting profits even as net premiums drop, according to a segment report from AM Best.
“Workers’ compensation is the key line of business driving the profitability of the whole property and casualty industry, and underwriting profits over the past decade have been largely attributable to favorable prior-year loss development,” said Christopher Graham, senior industry analyst for industry research and analytics at AM Best. “While the reserve cushion appears to be shrinking, it is expected to provide benefits to calendar-year profitability in the medium term.”
AM Best attributed much of the ongoing positive results for workers’ compensation to workplace safety improvements. Employment and industry trends have also shifted to “less injurious” employment overall.
Claim frequency dropped 5% in 2025, according to National Council on Compensation Insurance (NCCI) data, and has steadily dropped over the past 25 years. U.S. Department of Labor statistics also show that the workplace injury rate has dropped from 8.1 injuries per 100 workers in 1995 to 2.4 injuries per 100 workers in 2023.
Additionally, favorable loss development for older claim years has helped the sector, according to the ratings firm.
Net premiums written for the line dropped 7% in 2024 as many state workers’ compensation rating bureaus decreased rates and insurers further cut
pricing to gain business. Last year, a combined ratio of 88.8% was produced, which is the lowest of all major P&C lines of business.
“Consistency has been the recent hallmark of the P&C industry’s [workers’ compensation] insurers,” AM Best said. “The favorable combined ratio for 2024 represented the median of the combined ratios over the previous five years, the highest of which was in 2021, at 91.9, generating substantial profits.”
As a long-tail line of business, workers’ compensation assets produce investment income over a longer duration, AM Best added, making the sector “the key line of business driving the profitability of the whole industry.”
That said, workers’ compensation can still be affected by macroeconomic shocks, according to AM Best. Recessions, tariffs, and immigration policy changes represent potential headwinds for the sector.
“A key question for the workers compensation line is how much longer will rate and pricing declines continue and cause dissipating profit margins before insurers begin to hold the line on pricing, since, for many companies, workers compensation profits help offset more uncertain underwriting results for other lines of coverage,” said David Blades, AM Best’s associate director of industry research and analytics.
Article Published By: Zywave, Inc.
