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Work Comp Combined Ratio Under 100 – First Time In Eight Years


Work Comp Combined Ratio Under 100

The subject of Work Comp Combined Ratio seems to be appearing more in the insurance press lately.   I was unable to attend the NCCI Annual Issues Symposium.  However, I did make it to their data conference in March of this year.

One of the better definitions of the Combined Ratio can be found here.

Diagram Of Work Comp Combined Ratio Percentage
(c) insidermonkey.com

The combined ratio is calculated by taking the sum of incurred losses and expenses and then dividing them by earned premium. The ratio is typically expressed as a percentage. A ratio below 100% indicates that the company is making underwriting profit while a ratio above 100% means that it is paying out more money in claims that it is receiving from premiums. Even if the combined ratio is above 100%, a company can potentially still make a profit, because the ratio does not include the income received from investments.

The Work Comp combined ratio for all insurance carriers for 2014 was 98%.  When a carrier is able to write WC insurance at some type of profit, this ensures a healthier market. According to the NCCI State Of The Line -see Slide 13 from the presentation –  the Combined Ratio = (Loss + Loss Adjustment Expenses + Underwriting Expense + Dividends) / Earned Premium.

Insurers like to see that they do not have to rely on investment earnings to cover all the expenses of writing WC.  Operational efficiency is a C-level buzzword that refers to the Combined Ratio.

Picture of Work Comp Combined Ratio NCCIThe last time that a Combined Ratio came in under 1.0 was in 2006.   The ratio that year was 93%.   One has to remember that NCCI does not cover all states.   They do cover just less than 40 states.    This is a large enough percentage to reflect most, but not all of the WC market.

You may want to peruse all of the slides in the presentation.   NCCI always performs a great job when it comes to PowerPoint slides.

California has not been below 100% on their  Work Comp Combined Ratio since 2007.  However 2014 had shown a great improvement.   Check out the WCIRB Analysis here and then go to Exhibit 6 to see California’s  combined ratio for the last few years.   The 2014 year’s ratio was 105%.

The nightmarish years for California’s Combined Ratio was in the 1990’s when it exceeded 150%.   The State Fund ended up with almost the whole market due to such heavy underwriting losses.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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