The fact that the workers compensation combined ratio was 101 in 2013, a seven-point decrease from 2012 and a 14-point decline since 2011, is a sign that the workers comp market is returning to a state of “balance,” according to the industry’s statistical and rating organization, NCCI.

“We are finally starting to see an industry in balance with these results,” said NCCI President and CEO Steve Klingel, reporting on the state of the industry at NCCI’s annual symposium. “Today, industry costs are largely contained, claims frequency continues to decline, and the system in most states is operating efficiently. In short, the market is operating as it should on behalf of most stakeholders.”

Overall, the workers comp line showed a number of positive results in 2013, said Kathy Antonello, NCCI’s chief actuary. Premiums grew for the third consecutive year, and at the same time, the combined ratio fell by seven points.

While the workers comp calendar-year combined ratio for private carriers was 101 for 2013, the accident-year results also showed notable improvement in 2013, falling eight points to a combined ratio of 99, NCCI reported.

In other good news, lost-time claim frequency maintained a path of decline in 2013, down 2 percent, on average, in NCCI states. The 2 percent decline is within NCCI’s long-term annual estimate of a of 2-4 percent decline per year.

Other market indicators/trends highlighted in NCCI’s 2014 State of the Line report include the following:

• For the fourth consecutive year, the ratio of investment gains on insurance transactions to premium remained near the long-term average of 14 percent.
• This investment gain outcome, combined with the underwriting results, produced a workers comp pretax operating gain of 14 percent for 2013. This represents a significant increase over 2012 and is the industry’s first double-digit return since 2007.
• The overall reserve position for private carriers improved in 2013, following five consecutive years of deterioration. NCCI estimates the year-end 2013 reserve position to be an $11 billion deficiency for private carriers.
• In states where NCCI is the rating organization, the average indemnity cost per lost-time claim increased by a modest 2 percent in 2013, following increases of about 1 percent in both 2011 and 2012.
• The average medical cost per lost-time claim increased by 3 percent in 2013. This is the third straight year showing a change of this magnitude.
• The workers comp residual market experienced a second straight year of significant growth in 2013. Premiums grew by more than 30 percent, and the average market share in the residual market increased from 7 percent to 8 percent. NCCI’s latest data shows the pace of growth has slowed in the first quarter of 2014.
• Despite the growth in premium volume, the residual market policy-year combined ratio held steady in 2013 at 109. The total underwriting loss in the residual market pools serviced by NCCI grew to $98 million, up somewhat from $73 million in 2012.

While there was good news out of 2013, Antonello said the industry faces challenges ahead, including the job market and terrorism insurance.

“Slow growth in employment is impeding robust premium growth. And, while investment gains are strong, current yields are likely not sustainable in today’s low-interest-rate environment,” she said. “Also, the pending expiration of the Terrorism Risk Insurance Act continues to be a concern, as does the uncertain impact of the Affordable Care Act on workers compensation.”