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US Combined Ratio Falls Even Further to Historic Lows

US Combined Ratio Results

The US had its best Combined Ratio last year since the 1950s and is improving even more.  The current Combined ratio is .89 nationwide.

Graphic 88 Combined Ratio US Sign
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I first heard about the incredibly low ratio at NCCI’s Virginia Advisory Meeting in September of this year.  The Combined Ratio for 2016 was .94.  The ratio remains under 100% for more than three years.

The last time that carriers experienced a Combined Ratio this low was .93 in 2006.

NCCI predicts the Combined Ration will be even lower for 2018 = .88.  Usually, the Combined Ratio will “bottom out”  with a low figure then increase to a higher level.  Two years of incredibly low Combined Ratios look great for any comp-only carrier or any carrier that writes WC coverage.

See the chart below for Combined Ratios over the last 20 years.

For many years, the other lines of coverages – think General Liability, Property, Errors, and Omissions- contained enough profit to cover the terribly high combined ratios of 1.1 or higher.

Let’s stop and put that into perspective.   The Combined Ratio is calculated by dividing losses by earned premium or

Losses + Expenses / Earned Premium

or in basic form

Funds Carriers Paid Out / Funds Carrier Took In

Combined Ratio NCCI Chart
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$40.1 Billion net written premium in first six months of 2018.   State Fund’s share of written premium has shrunk. 0% change in net written premiums. Payroll is still the main driver in premium changes. Rates and Loss Costs = -10%. Claims frequency has fallen while being offset by a moderate increase in claims cost.

South Carolina Result

The South Carolina payroll figures are comparable to the US.  South Carolina’s combined ratio was .97 for 2017.

This equates to an 11% profit on Workers Compensation nationwide or a 3% profit margin for South Carolina.

Carriers presently not able to provide more significant discounts as in the past due to their internal ROI is presently lower.

Loss reserve analysis – look this up online.

In 2016 – 2017  SC loss frequency fell by 6%.  Indemnity claim severity increased 4%.   Medical claim severity increased 4%.

Frequency decreased 2% for SC in 2015 and 2016.

SC does not have a burn center.   There were three to four severe burn claims that experienced out-of-state fees that are not covered by a fee schedule as the injured employees had to be treated outside of SC.

SC NCCI recommended 9.2% decrease for 4-1-19  loss cost filing.

SC Change in Experience of 8.3% was responsible for most of the recommended loss cost decrease.

SC Legislative Issues – A few Opt Out bills were introduced by the Legislature but nothing happened with them.   The bills were based on the Texas  Opt Out Model

Other NCCI Information

US  – 844 bills introduced that were WC related,  474 were NCCI states, 94 bills were enacted – 111 first responder bills.

NCCI also covered:

One survey question that caught my eye at the end of the Advisory Forum consisted of asking whether or not an in-person Forum or a webinar would be preferable.  This leaves one to think that NCCI may be heading to webinar-based Forums.

The November 29th NCCI State Advisory Forum slides are here.  The file is a PDF.  I recommend taking a few minutes and reading up on the US and South Carolina statistics including the Combined Ratio.

Read More: Combined Ratio Difference Debate – Calendar vs. Accident Year

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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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