States with the Highest Workers’ Comp Rates

In 2023, the workers’ compensation market demonstrated significant strength and stability, marking another year of impressive performance for private carriers. According to data from the National Council on Compensation Insurance (NCCI), this sector achieved remarkable results, continuing a decade-long trend of profitability.

Key Metrics and Trends

Combined Ratio and Premiums:
Private workers’ compensation carriers recorded a combined ratio of 86 for the 2023 calendar year, maintaining the combined ratio below 90 for the seventh consecutive year. This consistent performance underscores the financial health and operational efficiency within the industry. Moreover, workers’ compensation premiums saw a modest increase, rising to $43 billion, which is a 1% uptick from 2022. This growth, albeit slight, reflects the sector’s resilience and capacity for steady expansion.

Reserve Redundancy:
The reserve redundancy in the workers’ compensation sector expanded to $18 billion, highlighting the industry’s robust financial foundation. This redundancy acts as a financial buffer, ensuring that carriers can cover future claims and obligations without significant financial strain.

Market Dynamics:
The voluntary market carriers showcased their strength as the residual market’s share of the workers’ compensation line continued its downward trajectory. The residual market’s share dropped from 6.1% in 2022 to 5% in 2023. For context, the residual market held a 12.5% share in 2003. This decline indicates a healthier voluntary market where more businesses can secure workers’ compensation insurance through regular market channels rather than relying on state-assigned risk pools.

Claim Frequency and Severity

In 2023, the frequency of lost-time claims decreased by 8%, which is twice the rate of the long-term average decline. This reduction in claim frequency is a positive indicator, suggesting improvements in workplace safety and risk management practices. Additionally, the severity of claims showed moderation last year, with NCCI reporting a 2% rise in medical-claim severity and a 5% rise in indemnity-claim severity. While these increases are notable, they are relatively modest, indicating controlled growth in claim costs.

Opioid Utilization and Prescription Trends

Opioid utilization in workers’ compensation claims experienced one of its most significant declines in recent years. According to the Enlyte Group, LLC, opioid utilization per claim dropped by 9.7%, and the cost per claim decreased by 7.2%. This decline reflects ongoing efforts to address and mitigate opioid dependence within the workers’ compensation system. However, the utilization of alternatives to opioids also saw decreases, albeit to a lesser extent. Non-steroidal anti-inflammatory drugs (NSAIDs) saw a 3% drop in utilization, while anticonvulsants declined by 7.4%.

Over the past year, eight of the top ten therapeutic drug classes experienced an increase in prescription costs. Notably, two classes saw costs rise by more than 10%. Enlyte reported that utilization per claim fell in every drug class except for medications treating migraines. Migraine medications experienced a 17% increase in utilization and a 10.2% rise in cost, while respiratory medications had the largest cost increase at 14.7% per prescription. These trends highlight the evolving landscape of pharmaceutical management in workers’ compensation.

Highest Workers’ Comp Costs by State

The slideshow above reviews the states with the highest workers’ comp costs based on the Workers’ Compensation Index Rate, which is a biennial survey conducted by the Oregon Department of Consumer & Business Services’ Information Division. The index rate is calculated per $100 of payroll and serves as the basis for determining final premiums for workers’ compensation insurance.

Key States with High Workers’ Comp Rates:

California: Known for its high cost of living and stringent regulatory environment, California consistently ranks among the states with the highest workers’ comp rates.
New York: With its dense population and high wage rates, New York also faces significant workers’ comp costs.
New Jersey: Similar to New York, New Jersey’s high labor costs contribute to its position on this list.
Alaska: The remote and hazardous nature of many jobs in Alaska drives up the cost of workers’ compensation insurance.

These states face higher costs due to a combination of factors including higher average wages, cost of living, and regulatory requirements. Businesses operating in these states must account for these higher insurance costs in their overall risk management and financial planning strategies.

Conclusion

The workers’ compensation market continues to demonstrate resilience and profitability, with key metrics showing stable or positive trends. However, businesses must remain vigilant about evolving risks and regulatory changes that can impact their insurance costs. By staying informed and proactive, companies can better navigate the complexities of workers’ compensation insurance and ensure they are adequately protected.

For businesses looking to optimize their workers’ compensation strategies, it is crucial to work with experienced insurance professionals who can provide tailored advice and solutions. At Skyscraper Insurance, we are committed to helping our clients understand and manage their workers’ compensation needs, ensuring they are prepared for whatever challenges lie ahead.

Stay tuned for more insights and updates on the latest trends in workers’ compensation insurance.

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Specific Technologies Driving Insurtech Investment in 2024

Understanding the Funding Decline The decrease in funding does not necessarily spell trouble for the insurance sector but instead highlights a strategic shift, the report suggests. “The insurance industry, like many sectors, is focusing on the most promising ventures with substantial insurance potential,” the report explains. “Insurers are directing their investments toward key areas and current trends such as embedded insurance, employee benefits, and cyber risk management. This strategic investment approach signals a forward-looking mindset within the industry.” Three Key Insurtech Trends for 2024 The report identifies three major trends shaping insurtech investments in 2024: Public Insurtech Companies: Financial and Growth Strategies The report also notes that public insurtech companies are prioritizing revenue growth as their main goal. These firms are restructuring their financial strategies to boost cash flow and capitalize on rising revenue streams. Their growth prospects are supported by expanding asset portfolios and strong market demand. “Public insurtech companies are focusing on revenue growth and optimizing their financial frameworks to increase cash flow,” the report states. “The growth potential for these companies is driven by increasing revenue opportunities, broadening asset bases, and a robust market for their services.” In summary, while global insurtech funding saw a decline in 2023, the industry’s focus on GenAI, digital process management, and connected insurance technologies is setting the stage for a dynamic and forward-looking 2024.

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Insurer Secures Unanimous Supreme Court Victory in New York Choice of Law Dispute

In the world of sports, a clean sweep, a shutout, or a perfect game is the ultimate achievement. In the legal arena, a unanimous decision from the U.S. Supreme Court is equally rare and significant. In a notable legal triumph, Great Lakes Insurance SE achieved a unanimous 9-0 victory in the Supreme Court on February 21, 2024. This victory follows a protracted legal battle that began in the District Court of Pennsylvania, advanced to the U.S. Court of Appeals for the Third Circuit, and culminated in the Supreme Court’s decisive ruling. Background of the Case: Great Lakes Insurance SE v. Raiders Retreat Realty Company The heart of the dispute was the insurance contract’s clause selecting New York law to govern any future legal conflicts. Although the financial implications of this case were relatively minor compared to the broader marine insurance industry, the insurer’s determination to uphold a crucial maritime legal principle has significant long-term implications for marine insurance. Faced with the insured’s counterclaims—including allegations of breach of fiduciary duty, insurance bad faith, and violations of Pennsylvania’s Unfair Trade Practices Law—the insurer was confronted with serious risks. Such claims could lead to the shifting of attorney’s fees, treble damages, and more, which might normally encourage insurers to settle rather than risk pursuing justice. However, Great Lakes Insurance, supported by The Goldman Maritime Law Group, opted to challenge the Third Circuit’s decision and seek clarity from the Supreme Court. Supreme Court Ruling: A Landmark Decision In a landmark ruling, Justice Brett Kavanaugh affirmed that choice of law provisions in maritime contracts should be upheld by default. This ruling is a major victory for establishing a consistent federal standard in maritime law and avoiding a patchwork of state laws that could complicate marine insurance disputes. The Supreme Court’s decision overturned the Third Circuit’s earlier judgment, which had questioned whether Pennsylvania’s public policy concerns might override the insurance contract’s choice of New York law. By upholding the New York choice of law clause, the Supreme Court eliminated the extra-contractual bad faith claims under Pennsylvania law, thereby ensuring that the dispute could be resolved based on the merits of the insurance claim itself. Significance of the Supreme Court’s Decision This ruling represents a significant advancement in maritime law, affirming that choice of law clauses in maritime contracts are generally enforceable. The decision establishes a clear, uniform legal framework for resolving maritime contract disputes, which will streamline the process and ensure fair adjudication of future insurance claims. Justice Clarence Thomas’s concurring opinion was particularly notable for its criticism of the 1955 Wilburn Boat v. Fireman’s Fund Insurance decision, which had previously influenced maritime insurance law. Thomas argued that Wilburn Boat was incorrectly decided and stressed that a uniform and enforceable set of rules is essential for the development of maritime law. Impact on the Marine Insurance Industry The Supreme Court’s decision sets a “bright-line” rule affirming that choice of law clauses are valid unless there is a strong argument against the selected jurisdiction. By endorsing New York’s insurance laws as a reasonable choice, the ruling supports a more consistent and predictable legal environment for marine insurers. This decision represents a major step forward in maritime law, helping insurers better assess risks, determine premiums, and ensure fair and efficient resolution of maritime insurance disputes.

States with the Highest Workers’ Comp Rates