Times are tough for the American worker, whether at the office or on the assembly line—and conditions are at least equally challenged for those underwriters that offer workers’ compensation insurance to the country’s employers.

This year’s “State of the Line” study from the National Council on Compensation Insurance (NCCI) paints a gloomy picture, with perhaps the most surprising and disturbing statistic: the nationwide lost-time claim frequency increased 3 percent—the first increase since 1997.

Net-written premium for workers’ comp private carriers declined 1.3 percent in 2010, according to the NCCI report, and the line produced a 1 percent pre-tax operating loss—the first such loss since 2002. The workers’ comp line is one of the largest in the U.S. property-and-casualty industry and among the largest commercial lines. It makes up nearly 8 percent of total industry premium volume and accounted for about 16 percent of all commercial-lines premium in 2010, according to A.M. Best.

Results for the workers’ comp line deteriorated sharply in 2010, A.M. Best noted. The calendar-year combined ratio increased nearly seven points to 118.1—the highest level since 2000, when the combined ratio was 121. The line’s results have worsened each consecutive year since 2006, when the combined ratio was 98.5.

One of the biggest challenges facing workers’ comp is rising medical costs, which represent almost 60 percent of the benefit dollar—even higher in some states. The average cost of medical costs is rising at about 6 percent per year, NCCI reports.

Current economic conditions are also a factor in the line’s performance, with claims—fraudulent or not—often seeing a spike in recessionary times.

The fact that the American workforce in general is growing older—and more obese—only adds to the WC challenges faced by both employers and carriers.

Despite this rather dismal state of WC affairs, NU was able to find some bright spots amid all these dark data clouds. The three winners of our Excellence in Workers’ Comp Risk Management awards (August 22/29 issue), for example, were each able to develop unique approaches to their programs that yielded substantial savings. Kennametal Inc., through a focus on loss prevention, the claims-administration process, effective return-to-work tactics and a corporate culture of safety, reduced its WC costs from $2.8 million in fiscal year 2008 to $1 million in fiscal year 2011—and, bucking the trend, it cut its number of claims from 293 to 125 over the same period.

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