The workers' compensation insurance market continues to demonstrate remarkable stability, posting another year of underwriting profitability even as claims severity rises and reserve redundancies narrow, according to the 2026 State of the Line report from the National Council on Compensation Insurance (NCCI).
Recently presented by Donna Glenn, FCAS, MAAA, chief actuary at NCCI, the annual analysis offered a comprehensive look at the financial health of the workers' compensation system and the economic trends shaping the market.
One of the report's key findings was that workers' compensation net written premium declined slightly in 2025, falling 0.2%. While payroll growth remained positive — driven primarily by wage increases — continued declines in loss costs offset much of that growth.
"Workers' compensation continues an era of exceptional performance with strong results and a financially healthy line," Glenn said in a prepared statement. "While there are early indications of potential headwinds on the horizon, the industry is positioned well to navigate these challenges."
The industry recorded a 2025 combined ratio of 91%, up from 86% in 2024. Although profitability moderated, the result still represents the 12th consecutive year of underwriting gains. NCCI attributed the increase primarily to higher loss and underwriting expense ratios.
Reserve adequacy remains another strength for the sector. NCCI estimates the workers' compensation industry maintains a redundant reserve position of approximately $14 billion. While that figure is down from $16 billion in 2024, it marks only the second consecutive year of modest reductions and continues to reflect a strong financial foundation.
Claim frequency also continued its long-term downward trend. Lost-time claim frequency declined 2% in 2025, though that pace was slower than historical averages. According to NCCI, the decline was driven largely by a reduction in the number of claims reported.
At the same time, claim severity increased. Both medical and indemnity claim severity rose 4% during 2025. Indemnity severity growth generally tracked wage increases, while medical severity outpaced the Workers Compensation Weighted Medical Price Index, suggesting that factors beyond medical inflation – including utilization and changing claim characteristics — may be contributing to higher costs.
NCCI also reported an accident year 2025 combined ratio of 102%, with prior accident years continuing to benefit from favorable reserve development.
Taken together, the findings highlight a workers' compensation market that remains profitable and well-capitalized, even as insurers monitor emerging cost pressures and evolving claim trends. The industry's strong reserve position and sustained underwriting discipline continue to provide a solid foundation for future market stability.
Maura Keller is a Minnesota-based freelance writer and editor.
(Featured image credit: wladimir1804/Adobe Stock)
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