In recent history, workers’ compensation insurance, as an overall line of business, has been rather profitable. In May 2019, NCCI reported a calendar year combined ratio of 83% for 2018, which was workers’ compensation’s most profitable year in modern history. Based on the information BMS has viewed, we expect that those tailwinds also flowed into last year. Another successful year gives us a reason to cheer during the upcoming NCCI Virtual Conference.
However, workers’ compensation is one of the lines of business most impacted by COVID-19. Layoffs and furloughs are leading to dramatic payroll drops and climbing the unemployment rate. Reduction in payroll is greatly reducing premiums, and increases in unemployment have historically correlated with adverse claim results. We now have the issue of potential assumed workplace causation leading to loss compensability related to the coronavirus itself, which is now under debate within state legislatures. Depending on the legislative and ultimately judicial outcomes, worst case scenarios point to a workers’ compensation “catastrophe” ranking as one of the largest disasters in insurance history.