The workers’ compensation industry’s results improved in 2012. Premiums grew for the second straight year, the combined ratio improved, and claims frequency declined at a faster rate than severity increased, according to a report by the A.M. Best Co.
The combined ratio came in at 110.3, a seven point decrease from 2011 and the first decline since 2006.
A.M. Best said the industry is showing positive signs despite facing challenges such as poor underwriting results, low investment yields and ongoing uncertainty over the impact of healthcare reform.
Industry results have benefitted from advancements in technology, which enable companies to react more quickly to negative trends, A.M. Best said. However, without the higher investment yields that the industry earned in the past, overall earnings have declined.
Operating results for A.M. Best workers’ compensation composite also improved in 2012, primarily due to a smaller reported underwriting loss coupled with solid but declining investment earnings.
The A.M. Best composite’s 2012 combined ratio of 114.3 is in line with the overall workers’ compensation line underwriting performance. These improved results reflect year-over-year rate increases and growth in payrolls but are offset in part by rising medical costs and the improving, but still relatively weak macroeconomic environment, according to the rating agency.