Best’s Market Segment Report: US Workers’ Compensation Segment Continues With Strong Profits Despite Pricing Cuts

OLDWICK, N.J.--(BUSINESS WIRE)--The U.S. workers’ compensation line of coverage remains a key driver of the profitability of the property/casualty insurance, although economic uncertainty could cause some turbulence for insurers in the near to midterm, according to a new AM Best report.

The Best’s Market Segment Report, “Workers’ Compensation Continues With Strong Profits, Despite Pricing Cuts,” states that the line remained profitable in 2024 with a combined ratio of 88.8, the lowest among the major property/casualty lines of business, even as net premium written for the industry fell nearly 7% due to rate decreases and pricing cuts. Midyear results 2025 results indicate another profitable year in the making and another decrease in premium in line with more rate decreases.

“Workers’ compensation is the key line of business driving the profitability of the whole property/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, Industry Research and Analytics, AM Best. “While the reserve cushion appears to be shrinking, it is expected to provide benefits to calendar-year profitability in the medium term.”

California remains the state with the largest share of national workers’ compensation premium, with over 20% of direct premium written in the United States, and twice as much as any other state. The top 10 states represent more than 60% of the national premium. As good as the overall results were in 2024, in six of these top 10 states, results were even better: the statewide combined ratio was better than the national combined ratio.

Although workers’ compensation has remained relatively unaffected by many of the factors leading to stress in other lines of coverage, which have produced more volatile year-to-year results, its payroll exposure base is susceptible to macroeconomic shocks. The possibility of a recession, the impact of tariff and immigration policy changes and other challenges, including legislative changes, are possible headwinds for this line of business. Recent increases in medical inflation in the overall economy will likely have less impact on the workers’ compensation system, as statutory payment schedules and different uses of physician services and pharmaceuticals limit the impact of unexpected inflation for workers’ compensation claims.

“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, associate director, Industry Research & Analytics.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=358624.

A video discussion of this report also is available at http://www.ambest.com/v.asp?v=ambworkerscomp1025.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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