Shifting Tides in Workers’ Compensation: What the 2025 Data Tells Us
The NCCI
The actuaries of the workers’ compensation industry gathered in Orlando last month for the National Council on Compensation Insurance (NCCI) Annual Issues Symposium to discuss the state of the marketplace. This annual event brings together some of the brightest minds in the industry to analyse past data, identify emerging trends, and forecast the future direction of rates and policies.
A key moment of the symposium is the “State of the Line” presentation, delivered by Donna Glenn, Chief Actuary at NCCI.
Highlights from the 2025 State of the Line include:
· Workers’ compensation net written premium decreased 3% in 2024.
· The Calendar Year 2024 combined ratio for workers’ compensation is 86%, a sign of underwriting profitability for the system.
· Workers’ compensation’s Accident Year 2024 combined ratio is 99% with prior years continuing to experience downward reserve development.
· NCCI estimates a redundant industry reserve position of $16B.
· Lost-time claim frequency declined by 5% in 2024, a faster pace of decline than the long-term average decline.
· Severity grew in 2024 with increases of 6% for medical claim severity and 6% for indemnity claim severity.[1]
The most important bullet is an overall combined ratio for the NCCI reporting States of 86%, which is now the fifth year in a row of a sub-90% forecast. This was not always the case with forecasts of the past sometimes being +100% due to rate inadequacy. As a direct causation, rates nationally have decreased each year back to 2014 or 11 years. In fact, over the last 20 years rates have only gone up twice, with one of those times (2012) being material.
As workers’ compensation rates are established by State, there are meaningful differences in approach, formulas and political environments that tend to influence profitability on a State-by-State basis. Usually some States go up and some down to average out to a Countrywide increase or drop in rates. In recent years though, it has been decreases across the board with this year only showing Nevada having rate increases:
Changing Tides Elsewhere?
As the NCCI results paint a very profitable picture for workers’ compensation, it only sets rates for 38 of the 46 voluntary States. California, New York, New Jersey and MA to name a few with California on its own accounting for 24% of the national workers’ compensation marketplace. The independents tend to update their projected loss costs more rapidly (quarterly v annual) and react to trends faster as a result.
California
Reported in the California Workers’ Compensation Insurance Rating Board (“WCIRB”), the average rate in CA increased from $1.63 (through 6 months) to $1.60 per $100 of payrolls. This was the first increase seen in California since 2013-14 when rates went from $3.10 to $3.19 per $100 of payrolls, or about double the average rate needed per the WCIRB 9/1/24 Pure Premium Rate Filing. In the recent WCIRB 9/1/25 Pure Premium Rate Filing it reports that the average in 2024 settled in at $1.61 per $100 of rate but an additional 11.2% is needed for ongoing rate adequacy in 2025. This need is in direct correlation to the deterioration of the California workers’ compensation combined ratio as a whole:
National markets that tolerate California business but do not target it are already starting to tighten underwriting. We anticipate some neutralizing of a very price-competitive market with a push to have large enough policyholders take risk on their program through some type of loss sensitive mechanism such as a deductible program.
Massachusetts
In Massachusetts, the Workers' Compensation Rating and Inspection Bureau (“WCRIBMA”) sets the rates for workers' compensation insurance usually each July 1’st. For 2024, the WCRIBMA requested a rate reduction of 8.3%, but the MA Insurance Commissioner and Attorney General did not think that went far enough and finally settled on a rate decrease of 14.6%, or 43% higher than proposed. For 2025, the WCRIBMA proposed a 7.1% increaseand cited further deterioration of rate adequacy. Additionally, they cited the aggressive decrease taken the year before without merit and rises in frequency and severity. Even though not an election year it devolved to politics as the Massachusetts Commissioner of Insurance disapproved the filing on the basis of the methodology used by the actuaries. In short, the WCIRBMA used only post-pandemic data for some of its study and the State felt the full five years including the pandemic should have been used. Instead of offering a lower increase, or anything at all, there will be no rate changes according to the WCRIBMA for 7/1/25.[1] We feel the impact of this decision will be more severe in MA as there are fewer pricing options to offset the lack of rates and the State, unlike CA and others, solely decides the profit and administration charge to be collected a s part of premiums. We have already been advised the underwriting appetite for some carriers in MA will be tightening immediately.
Conclusion
While the vast majority of states continue to reduce workers’ compensation rates, we expect the pendulum to begin swinging the other way for some key states in 2025. New York will be the next major independent state to post in July for an effective date of 10/1/25, followed by many others releasing rates for a 1/1/26 implementation.
This year is shaping up to be more complex, as factors such as wage inflation, rising indemnity costs, and the potential impact of tariffs on medical expenses come into play.
[1] https://www.wcribma.org/mass/IndustryInformation/RateFiling/2025/RateFiling2025.aspx
[1] https://www.ncci.com/Articles/Documents/AIS2025-SOTL-Presentation.pdf