The workers’ compensation insurance segment has enjoyed sustained periods of market stability, supported by strong reserves and profitable underwriting results for nearly a decade. As a result, policyholders have benefitted from flat premium rates or modest rate decreases. The National Council on Compensation Insurance (NCCI) reports that in 2022, the segment produced a combined ratio of 87, indicating ongoing profitability and marking the ninth consecutive year with a ratio below 100.

Despite favorable 2023 segment conditions, industry experts caution that reserve redundancies, from reduced presumptive liability issues since the onset of the pandemic and increased market competition, could drive down underwriting profits in 2024. Fortunately, the ratio is not expected to breach 100, offering reassurance to policyholders. Consequently, most policyholders can anticipate another year of stable premiums or slight rate reductions. Organizations with higher experience modification factors (EMF) may encounter higher pricing and potential coverage restrictions.

Trends Shaping the Workers’ Compensation Insurance Market

Changes to the Experience Modification Factor (EMF)

The experience modification factor (EMF) is critical in the calculation of workers’ compensation premiums. The NCCI, the regulatory body for the workers’ compensation system in 36 states, is making alterations to specific elements of its EMF formula for 2024. While the formula itself remains unchanged, adjustments in how certain foundational components are derived aim to reflect cost variations more accurately among states. Organizations should familiarize themselves with these changes to help prepare for potential premium adjustments.

Artificial Intelligence (AI) Solutions for Injury Prevention & Management

The implementation of AI technology presents an opportunity to prevent and address occupational injuries. According to industry data,, AI technology has the potential to reduce workers’ compensation claim expenses by as much as 45%. By utilizing advanced imaging, scanning and data analysis, AI can quickly diagnose injuries, provide comprehensive insight into employee conditions and streamline claims management. Integrating AI with wearable devices and sensors enhances real-time monitoring, automates rehabilitation components and adjusts treatment plans based on workers’ recovery progress. Businesses can benefit from accelerated recovery outcomes, reduced claim expenses and cost-effective claims management.

Employee Mental Health Challenges

The prevalence of mental health concerns is increasing, with 20% of U.S. adults experiencing mental illnesses (e.g., anxiety, depression, post-traumatic stress disorder) each year. Failure to address moderate and severe mental health distress can heighten the likelihood of workplace accidents. These individuals may be less engaged or aware of potential safety hazards, resulting in poor decision-making. Consequently, these incidents contribute to higher workers’ compensation costs.

Forty-one states have laws that address occupational mental health issues, and ongoing efforts at the federal and state levels will further enhance this coverage. However, there are differences in coverage and eligibility requirements across states. Some laws only provide benefits for mental health conditions related to specific industries or unexpected workplace incidents. Employees are responsible for proving their conditions are work-related to access coverage. This can be difficult, as mental health concerns are difficult to objectively measure. As a result, obtaining benefits might be challenging for some workers.

Inflation Issues

The workers’ compensation segment is affected by two types of inflation: medical and wage inflation. The National Library of Medicine asserts that these costs comprise the largest share of workers’ compensation expenses. According to the NCCI, medical costs in the workers’ compensation segment have surpassed the 10-year average, presenting ongoing medical inflation concerns and increasing workers’ compensation costs. Additionally, many businesses have raised wages to attract employees, leading to wage inflation. Since payroll is leveraged as a basis to calculate workers’ compensation premiums, wage inflation could prompt increased rates.

Strategic Tips for Workers’ Compensation Insurance Buyers

• Safety & Health Programs: Address common risks, especially when using a loss-sensitive workers’ compensation program in your safety and health programs.
• Implement Digital Solutions: Consider implementing various digital solutions (e.g., wearable safety technology, telemedicine) to help prevent and treat injuries within your workers’ compensation program.
• EMF Formula Changes: Stay informed of upcoming changes to NCCI’s experience modification factor formula. Consult with a trusted insurance advisor to understand the potential impact on your workers’ compensation premiums and develop strategies for improvement.
• Wellness Initiatives: Implement workplace wellness programs designed to promote the prevention and management of chronic health conditions and enhance overall employee wellbeing. Incorporate mental health resources and support options in your employee wellness offerings.
• Handling Claims: Have clear processes established to manage your workers’ comp claims diligently and efficiently. Effective claim management protocols can help mitigate claim severity and prevent future losses.

We’re Here to Help Protect Your Business in 2024

Experts have predicted a 2% increase in workers’ compensation pricing. You do not have to respond to this changing landscape of workers’ compensation alone. We are here to help you navigate these industry trends with ease. For additional resources, risk management guidance or insurance solutions, please connect with a member of our team.