Profitability Challenges Persist in Workers’ Comp Sector: Report

The troubled workers’ compensation line of business got a break in 2011 as employment and payrolls stabilized and overall net premiums written increased by 10 percent, according to an A.M. Best report.

Overall underwriting results for the aggregated workers’ comp line for companies and state funds improved slightly, as the combined ratio declined to 117.8 in 2011, from 118.1 the previous year.

The report, titled “Despite Favorable Pricing Trends, Profitability Challenges Persist,” says that the premium growth of 10 percent outpaced that of U.S. commercial lines, which saw a reported 4 percent increase in net premiums written for the year.

In addition, the rise in net premiums written for the workers’ comp line comes after five consecutive years of declines, from 2006 through 2010, when a combination of competitive pricing, a series of consecutive rate increases (often related to statutory reforms), poor employment and challenging macroeconomic conditions put pressure on the sector.

However, A.M. Best said it expects that profitability for the workers’ comp line will remain a challenge despite a more favorable pricing environment, due to an increasingly competitive operating environment and the cumulative effect of rate increases.

The A.M. Best report also notes:

Source: A.M. Best