Robust Workers’ Compensation Performance and Future Trends
The Workers’ Compensation line within the property and casualty insurance sector demonstrated robust performance in 2025, securing a calendar year combined ratio of 91%, outperforming the industry average of 93%. According to the National Council on Compensation Insurance's (NCCI) 2026 State of the Line report, this line is among the top performers in major business categories.
Despite this success, private carriers experienced a slight dip in net written premium by 0.2%, totaling $41.6 billion, marking it as the sole major line with declining premium volume. This decrease is attributed to a 1.8% reduction in direct written premiums across NCCI and state-specific bureau regions between 2024 and 2025, primarily due to bureau loss cost level reductions. NCCI's filing approvals are expected to lead to an average 5.0% drop in written premiums from 2025 to 2026, with various states observing reductions, while Nevada saw a notable 21.6% increase.
Payroll and Market Trends
The expansion of payroll, an essential exposure base for workers' compensation, grew approximately 5% in 2025, driven mostly by wage increases rather than employment growth. The healthcare sector was an exception, contributing to job creation. While the increase in payroll helped offset the impact of reduced loss costs on premium volumes, overall premiums continued to decline.
The report also touches on the ongoing contraction in the residual market, with NCCI-managed pool premiums decreasing to about $640 million in 2025, continuing a downward trend from a 2015 peak of approximately $1.15 billion. Consequently, the residual market share fell to roughly 5%.
Claim Patterns and Severity
Claim frequency and severity trends evolved as NCCI reported a 2% drop in lost-time claim frequency in 2025, although both medical and indemnity claim severities increased by 4%. The accident year combined ratio reached 102%, surpassing the breakeven point, although the calendar year ratio remained strong at 91%.
NCCI analyzed cumulative trauma injuries, noting national stability but a considerable rise in California, where such injuries represent about 26% of lost-time claims, significantly exceeding the average in NCCI states. These injuries are classified based on primary diagnoses or specific injury codes.
Industry Challenges and AI Solutions
In the competitive insurance brokerage sector, challenges arise from tight labor markets and heightened demands for precision and speed from clients and carriers. Vertical AI, tailored specifically for insurance operations, emerges as a promising solution. Fulcrum, for instance, has developed an AI platform designed to enhance brokerage workflow precision, reducing human error and expediting policy delivery.
Lexie Tonelli of Fulcrum emphasizes the platform's efficiency in automating routine tasks, which allows brokers to focus on strategic client relationships. As client expectations continue to rise, brokerage firms leveraging such AI-driven innovations can expect heightened efficiency and improved client service quality, potentially driving sustained business growth.