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Workers Comp Combined Ratio Means Market Extremely Healthy


Workers Comp Combined Ratio Questions Asked By Readers Over The Last Week

Workers Comp Combined Ratio remained a hot topic from last year.   Last week, at the NCCI Virginia State Advisory Conference, the Workers Comp Combined Ratio stunned the audience, and even the NCCI presenters.

NCCI Chart Workers Comp Combined Ratio
(c) NCCI, Boca Raton FL

Last year, the level was at .89, which many pundits and actuaries thought the Combined Ratio was bottoming out to the lowest point or bottom of the trough.  I received quite a few questions on how the Workers Comp Combined Ratio equals a healthy market.

One must remember the Workers Comp Combined Ratio level of .83 pegs a national statistic.  Each state may have a different level.

How is the statistic computed? 

The Combined Ratio computes out as  Losses + Expenses / Premiums.   

What does that mean for insurance carriers? 

For each dollar of premiums written, the insurance carriers generated a 17% quasi-profit.  The formula above over-simplifies the current market condition.  The overall market, though, has been healthy since 2017.

Is NCCI confident in the figure? 

Yes, the NCCI Actuary presenter Jay Rosen felt the figure, while unexplainable to a point, was very accurate.   They use the numbers given to them by their members.

Why did the market turn so positive so quickly?

Man workers comp combined ratio on the table working on computer
Wikimedia – U.S. Navy photo by Corinna Duron

The NCCI presenters at the Virginia Forum seemed to not be 100% sure of why the market became so healthy.   Take a look at the formula.  The losses had to reduce or the premiums had to increase for the ratio to shrink.

If you check out the graph (Courtesy of and Copyrighted by NCCI) at the top of this article, you can see that nationally the Net Premiums Written have increased over the last few years.    Check here for the Virginia State Advisory PDF files.

Overall, there was no one statistic or number that was the “aha” moment.   Wages rose a little.  Indemnity severity and number decreased a smidgen.  No one variable made it the Workers Comp Combined Ratio drop.  All the variables mixed together made the underwriting gains increase significantly.

Would a recession return the number to above 1.0? 

A recession would move the numbers back closer to 1.0.   One has to remember the NCCI figures run approximately 18 months behind due to the time needed for data collection and calculation.   The market will remain healthy through 2021 regardless of a recession.

Please remember that a slowdown and a recession are two very different animals.

The national Workers Comp Combined Ratio looks excellent.   What about my specific state?

If you wish to know the Combined Ratio in your states of operation, click here for the NCCI list.  If your company operates in non-NCCI states with independent bureaus (i.e.,  Pennsylvania, North Carolina) those bureaus crank out the same statistics.   NCCI covers the largest number of states.

Why don’t the carriers refund some of that profit to policyholders?

I recommend not getting down into the minutia of where does the 17% profit end up with the carriers.   As a policyholder, check your newest or upcoming quote at renewal.

The industry workers should be happy with that number.  As long as the market is healthy, the agents, adjusters, actuaries, underwriters and other workers comp personnel should know that a healthy market means more room for advancement and job security.

Look at the Workers Comp combined ratio as a bellwether.

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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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