The National Council on Compensation Insurance (www.NCCI.com) provides annual reports on the state of the industry. The following are some interesting facts:
- The workers compensation insurance product line reported revenue of $37.0 billion for 2013.
- The combined ratio for 2013 was 1.01%
- That combined ratio calculates a $370.0 million loss (1% of revenue) for the industry.
What is the combined ratio?
The combined ratio measure the profitability of the line. It general it combines the losses incurred from claims plus the expenses for running the program. It does not include the gains from investing the premiums so actual losses are a bit lower. Unfortunately we have all experienced yield compression during the last two years. It's hard to make a return on our savings.
- In 2001 the combined ratio was 122.0%......wow!
That's a record loss year for the industry!
- During the last 35 years the industry has only had a combined ratio less the 100% four times. Only twice in the last decade. It has been hard to make money.
With investment returns at historical lows the industry is searching for ways to contain cost. Claims management will continue to be the focus.
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