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2023 NCCI’s Annual Insights Symposium – Gen Re Summary and Highlights
Solid financials, including premium growth and further underwriting gains, made 2022 another positive year for the Workers’ Compensation industry. According to the latest analysis provided by NCCI at its Annual Insights Symposium (AIS), Workers’ Compensation continues to outperform other Property / Casualty lines of business in the U.S. While there is potential for a recession and the labor market remains tight, inflationary pressure on medical costs appears to be muted. Read on for a summary and several key takeaways from the symposium.
The calendar year 2022 combined ratio for private carriers is 84%. This is the sixth consecutive year of results under 90% and the ninth consecutive year of underwriting gains. Workers’ Comp results continue to compare favorably against the total P/C net combined ratio of 102%. Lost-time claim frequency for 2022 was 4% lower than that in 2021. After the up and down swings during the pandemic, this outcome appears to be more in line with the long-term average change of ‑3.3%. The cumulative change in frequency from 2019 through 2022 is approximately a 5% decrease.
Net written premium for private carriers in 2022 was $42.5 billion, which is an increase of 11% from 2021. Rates continue to decline, and Bureau premium levels are expected to decrease by an average of 7.6% from 2022 to 2023 based on approved NCCI filings. Payroll increased by 10% in 2022, from equal parts employment and wages. Wage gains were largest for low-wage workers. Leisure and Hospitality saw the largest payroll increase.
While still in a tight labor market, the number of new hires and workers leaving their current jobs have slowed over the past year. This results in a shrinking share of short-tenure workers. NCCI reports there are 2 to 3 million fewer workers, resulting in a labor shortage. As such, labor supply will likely continue to be a constraint on employment growth. We are presently at full employment as the unemployment rate of 3.4% is below pre-Covid lows. However, this level could rise as Federal Reserve rate hikes slow the economy.
The U.S. economy and labor markets have remained resilient, even with rising interest rates, according to Robert Hartwig, Clinical Associate Professor of Finance at the University of South Carolina, during his presentation at AIS. Mr. Hartwig believes there is a risk of a mild recession later in 2023, and the recent banking failures have increased this risk.
Regarding overall inflation, the U.S. inflation rate (CPI) has already started to ease, after peaking at 9.1% in June 2022. The expectation is that it will be closer to 4% by the latter half of 2023 and closer to 2.5% for 2024. This projected moderation is not linear and is also dependent upon energy prices and Federal Reserve rate hikes.
Medical inflation does not move in lockstep with the CPI. The CPI‑Medical index had risen to 6% during 2022 but was at 1.5% as of March 2023. Since the CPI‑Medical index includes some data that does not pertain to Workers’ Comp, NCCI utilizes an Adjusted CPI‑Medical Index, which is more reflective of Workers’ Comp medical costs. The Adjusted CPI‑Medical index rose to a high of 3.5% in 2022 before heading back down towards 2.5%.
Drilling down further, medical costs that impact Workers’ Comp have both unique price trends and unique utilization trends for each type of medical service. There are many different numbers and data points that go into medical price pressure concerns for Workers’ Comp. As the diagrams below indicate, the physician category, which has the highest distribution in terms of medical spend, is the lowest in terms of price pressure. The categories with the highest price pressure − medical supplies and other (home healthcare, transportation, etc.) − represent a smaller overall share of total medical spend but can be significant on larger claims.
NCCI’s Chief Actuary, Donna Glenn, provided a detailed review of results, trends, and cost drivers in the Workers’ Comp industry. Here are some selected highlights from her presentation:1
While it appears medical inflation concerns may be muted, other concerns still exist regarding the economy, the impact of the ongoing labor shortage, and the potential for future global events. However, as NCCI President and CEO Bill Donnell noted in his introductory remarks, there are many positives in Workers’ Comp, including continued falling frequency, relatively benign medical severity trends, and a strong reserve position. As Mr. Donnell put it, “there have been more tailwinds than headwinds influencing Workers’ Comp results.”
Gen Re is proud to be part of a healthy and strong Workers’ Comp system that continues to deliver on its promise. We look forward to working together towards continued success!
Gen Re wishes NCCI a Happy Anniversary as it celebrates its 100th year of service to the Workers’ Comp industry and its stakeholders!
