As we enter 2025, the U.S. workers’ compensation insurance market is anticipated to maintain its stability, though several emerging trends suggest potential challenges ahead.
MARKET STABILITY AND RATE TRENDS
Nationally there is an overall average reduction of 6.0% in workers’ compensation premium rates for the voluntary market in 2025. Pennsylvania saw the biggest decrease at -13.2% while South Carolina remained flat. This reduction represents a decade of rate decreases, reflecting ongoing improvements in workplace safety and effective risk management strategies.
However, industry experts caution that the prolonged period of reserve redundancy and low claims frequency is beginning to soften. Indicators reveal a gradual decline in reserve strength and a more cautious approach to reporting incurred losses, suggesting that the market may need to recalibrate to maintain profitability.
KEY STRENGTHS OF THE MARKET
The workers’ compensation sector has historically been profitable, consistently outperforming other major lines in the property/casualty domain such as property, auto, liability and umbrella coverage. This success is attributed to factors such as decreasing claims frequency, favorable developments in prior year loss reserves, and robust risk-adjusted capitalization.
EMERGING CHALLENGES
Despite its strengths, the workers’ compensation market faces several challenges:
- Inflationary Pressures: Medical treatments are becoming more expensive, and wage growth could increase indemnity payments, further straining costs.
- Aging Workforce: An aging workforce brings new risks and complexities that could impact claim severity and frequency.
- Technological Integration: The rise of remote work presents unique challenges, such as mitigating health risks tied to home office setups. Businesses will need robust policies to address ergonomic issues and create standards for safe remote environments.
UNDERWRITING RESULTS AND CLAIMS TRENDS
The market’s underwriting results have remained solid, benefiting from a decrease in workplace accidents and reduced instances of fraud. This has led to favorable combined ratios, driven by consistent loss ratios. However, the gap between medical and indemnity severity has been narrowing, reflecting changes in the nature and cost of claims.
REGULATORY DEVELOPMENTS
Efforts by states and municipalities to extend protections to gig economy workers are ongoing. The big trend for 2025 will be the ongoing legal battles over worker classification, as there is significant debate regarding whether gig workers should be entitled to the same benefits as traditional employees.
CONCLUDING THOUGHTS
As we look towards 2025, the U.S. workers’ compensation insurance market is poised to continue its stable trajectory, underpinned by strong fundamentals. However, the industry must carefully navigate the challenges of inflation, an aging workforce, technological integration, and regulatory developments. The interplay of these factors with the broader economic recovery and labor market trends will be crucial in shaping the market’s performance in the upcoming year.
RATE TRENDS BY STATE
| STATE | AUTHORITY | EFFECTIVE DATE | RATE RECOMMENDATION | |
| AK | Alaska | NCCI | 1/1/25 | -5.5% |
| AL | Alabama | NCCI | 3/1/25 | -6.1% |
| AR | Arkansas | NCCI | 7/1/25 | NA |
| AZ | Arizona | NCCI | 1/1/25 | -9.1% |
| CA | California | State Bureau | 10/1/24 | -2.1% |
| CO | Colorado | NCCI | 1/1/25 | -4.3% |
| CT | Connecticut | NCCI | 1/1/25 | -6.1% |
| DC | District of Columbia | NCCI | 1/1/25 | -4.4% |
| DE | Delaware | State Bureau | 12/1/24 | -8.4% |
| FL | Florida | NCCI | 1/1/25 | -1.0% |
| GA | Georgia | NCCI | 3/1/25 | -3.3% |
| HI | Hawaii | NCCI | 1/1/25 | -3.5% |
| IA | Iowa | NCCI | 1/1/25 | -7.2% |
| ID | Idaho | NCCI | 1/1/25 | -6.7% |
| IL | Illinois | NCCI | 1/1/25 | -5.6% |
| IN | Indiana | NCCI | 1/1/25 | -6.8% |
| KS | Kansas | NCCI | 1/1/25 | -6.1% |
| KY | Kentucky | NCCI | 1/1/25 | -8.4% |
| LA | Louisiana | NCCI | 5/1/25 | -8.7% |
| MD | Maryland | NCCI | 1/1/25 | -13.2% |
| ME | Maine | NCCI | 4/1/25 | NA |
| MI | Michigan | State Bureau | 1/1/25 | -1.9% |
| MN | Minnesota | State Bureau | 1/1/25 | -0.5% |
| MO | Missouri | NCCI | 1/1/25 | -5.3% |
| MS | Mississippi | NCCI | 3/1/25 | -4.6% |
| MT | Montana | NCCI | 7/1/25 | NA |
| NC | North Carolina | NCCI | 4/1/25 | -5.2% |
| NE | Nebraska | NCCI | 2/1/25 | -0.9% |
| NH | New Hampshire | NCCI | 1/1/25 | -5.6% |
| NJ | New Jersey | State Bureau | 1/1/25 | -6.9% |
| NM | New Mexico | NCCI | 1/1/25 | -11.7% |
| NV | Nevada | NCCI | 3/1/25 | 6.5% |
| NY | New York | State Bureau | 10/1/24 | -9.0% |
| OK | Oklahoma | NCCI | 1/1/25 | -9.2% |
| OR | Oregon | NCCI | 1/1/25 | -3.2% |
| PA | Pennsylvania | State Bureau | 4/1/25 | -13.2% |
| RI | Rhode Island | NCCI | 8/1/25 | -4.8% |
| SC | South Carolina | NCCI | 4/1/25 | 0.0% |
| SD | South Dakota | NCCI | 7/1/25 | NA |
| TN | Tennessee | NCCI | 3/1/25 | -3.6% |
| TX | Texas | NCCI | 7/1/25 | -11.5% |
| UT | Utah | NCCI | 2/1/25 | -5.8% |
| VA | Virginia | NCCI | 4/1/25 | -12.0% |
| VT | Vermont | NCCI | 4/1/25 | -7.4% |
| WI | Wisconsin | State Bureau | 10/1/24 | -10.5% |
| WV | West Virginia | NCCI | 1/1/25 | -9.1% |
| Average | -6.0% | |||