NCCI’s Chief Actuary Discusses Workers’ Comp Profits, Safety and Future

The workers’ compensation system overall is healthy and strong. The sector has seen long-term frequency declines for multiple decades with moderate severity of claims costs for at least the past decade. That’s according to NCCI’s chief actuary, Donna Glenn, who shared that 2023 marked another profitable year for the workers’ compensation industry.

Glenn, who leads NCCI’s Actuarial & Economic Services Division, is gearing up for its Annual Insights Symposium in Orlando, Florida, May 13—15, 2024. She authors the annual NCCI State of the Line report, which takes a deep dive into the previous year’s results for the workers’ compensation system, highlighting financial indicators, trends, and broad economic markers that impact the system. The report is released each year at AIS.

“2023 was another profitable year for the industry,” Glenn told Insurance Journal in an interview ahead of the 2024 State of the Line report release date. The system overall is “remarkably healthy and stable,” Glenn said, with a “healthy combined ratio” that is well under 100, the breakeven point of profitability for the sector.

That trend has held strong for more than a decade, she added. “We have seen a decade of very strong results.” Helping those results is the rise in payroll growth and a strong labor market.

“Rising wage growth has contributed to overall premium growth in the system,” Glenn said. “We had two years, 21 and 22, show double digit payroll growth and 2023 will show another sizable increase in payroll.” She added that wage growth outpacing claims cost increases in workers’ comp overall is a primary driver of a healthy workers’ comp system.

“We see a very strong and very stable labor market,” Glenn said. “Despite what happened in Covid for about 18 months, we’ve had low unemployment, strong labor participation, and increasing wages, all of which are good for workers’ compensation.”

Adding to the system’s healthy stance is the decades’ long trend of claim frequency declines, Glenn added. “We have seen long-term frequency decline for multiple decades, and moderate severity of claim costs in the last decade. Those are the costs for workers’ compensation, both medical as well as indemnity,” she said.

She added that while the broader economy has experienced inflation pressure, workers’ comp medical costs have not experienced quite the same type of inflation.

“Even during the past two years as inflation has climbed, price pressure on medical WC claims costs has been slow to rise,” according to NCCI. “So, it’s really a powerful system right now,” Glenn said.

Safety

Workers’ comp claim frequency has been decreasing for two decades, and while data showed some volatility during the COVID-19 pandemic, 2022 returned to the trend of a long-term decline in claim frequency, Glenn said. Improvements in safety have had a tremendous impact on that trend, she added.

“There are multiple decades, I would say, going back to the ’70s of safety enhancements and how that has impacted the workers’ comp system. And we continue to see a long-term decline in overall frequency of incidents occurring in the workplace.”

Technology innovation is fueling safety as well, Glenn said. NCCI recently explored the future of workplace safety technology in a three-part series, The Future of Workplace Safety Technology Is Now, where workplace safety technology was discussed by carriers, employers and technology providers.

Glenn said the positive results of what new and emerging safety technology can provide are significant and hold a place in the future of workers’ comp. “For example, in one particular instance, an employer found that they had an 86% reduction in forklift related incidents by using computer vision around the forklift,” she said.

That’s a significant reduction in potential injuries, she added. But she stressed that technology alone can’t get the job done. “Safety technology is most effective when combined with a strong safety culture from employers that incentivize safety in the workplace.”

Trends

There are a few trends on the horizon that NCCI is watching to gauge their potential impact on the health and stability of the workers’ compensation line in the future.

Extreme weather is one area that NCCI is watching, Glenn said. “Extreme heat and extreme cold are (risks) that we want to know more about,” she said. NCCI is analyzing data from carriers and the weather industry to better understand how climate extremes might impact future trends in worker injuries. “Right now, we don’t see it as a ‘storm,'” she said, “but we do see it as a concern in the industry” as data shows more work comp claims during extreme weather events.

Another evolving area in workers’ comp is continued advancement of medical marijuana in many states, Glenn added. “Marijuana is going to be tricky because while we have powerful data (in other areas) we don’t have data on marijuana yet,” she said. “It’s definitely a challenge for us, and for the industry.”

Lastly, Glenn mentioned NCCI’s focus on the compensability of mental health related injuries on the job. “Specifically, something we call mental-mental compensability,” she explained.

“Since 2018, 20 states have enacted legislation regarding the compensability of mental injuries on the job, and 14 states in addition to that have pending legislation,” she said.

While the focus has been on first responders and PTSD concerns, the issue also reflects a broader concern in the workers’ comp industry about mental health and the role that it plays in a holistic approach to worker recovery in the workers’ comp system, she said. “Work related injuries can be traumatic and very disruptive to an individual’s life, and mental health challenges can result in exacerbating existing behavioral conditions, so it has an effect and adds complexity to overall claim handling.”

Understanding new trends and how they impact the line is critical in forecasting the future health of workers’ comp, she added. It’s data from carriers, other bureaus, and the quality of that information that is powerful for the sector. “And NCCI is in that mode of strategically thinking about what data” is needed now and in future.