US workers compensation industry will continue to be profitable this year

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Fitch data showed that the market remained strong throughout 2017 with positive 2018 performance.

New Fitch Ratings data shows that the US workers compensation industry did well last year and may continue to see underwriting profits this year.

The data from last year until now shows a trend of strong performance, though that could change.

Last year’s strong US workers compensation performance represented the third consecutive year following that trend. The industry statutory combined ratio was around 92 percent, said Fitch Ratings data.

The recent Fitch Ratings report showed that though the workers compensation industry may remain profitable this year, next year’s situation may change. In fact, it predicts more of a break-even situation in 2019 within the industry. Moreover, over the long-term it looks as though the industry’s performance may continue to slide. These projections are based on historical performance volatility, said the report.

That said, it’s clear that the future of the US workers compensation industry is not set in stone.

Fitch noted in its report that past relatively stable loss trends and underwriting and pricing actions have brought positive influences on performance in the market of late. Positive performance drivers in the past have included: improvements in underwriting exposure growth and the ongoing reduction of claims frequency rates, as well as more conservative reserve levels.

The present market may be maintaining a strong performance, but Fitch predicts certain factors to change that situation. For instance, it pointed to the increasing competition leading to decreasing premium rates which will eventually bring on weaker underwriting outcomes. Other factors that may have a negative impact on performance include raised severity of medical loss, premium rate pressure and past reform benefits erosion in certain important states.

Moreover, an increase in tech spending and weaker premium revenues have brought on raised expense ratios. That trend took things two points higher for the industry since 2014.

Loss cost trend changes, especially when it comes to the severity of claims, show potential as an area in which US US workers compensation - safety shoes - screw - risk of accidentworkers compensation performance will crumble. Fitch recommended close monitoring in this category. Medical claims and indemnity cost severity stayed essentially stable when compared to prior trends over almost ten years. That said, they did rise more recently.

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