2025 in Sight, 2024 in Review With Donna Glenn

[MUSIC] Hello and welcome back to the State of the Line podcast. I'm your host, Christine Pike, and today I'm joined by a very special guest. Donna Glenn and CCI's Chief Actuary is returning to the podcast today. Donna, welcome back. Thank you for having me here back, Christine. There is a lot I want to chat with you about today. So let's jump right in starting with the latest financial results. Your team put out an article on NCCI called 2025 Insight, 2024, in review the latest results for workers compensation. So this article provides updates on the WC line of business, but didn't you just present that information at AIS 2025 in May? Why are we updating that information already? We are you are correct that back at AIS in May, I presented a State of the Line report, which is our comprehensive assessment of the work comp insurance line of business. The results that we present in that report reflect the most current data available at that time. And actually, the 2024 results ended up being pretty much in line with what we presented in AIS. Excellent. So let's jump right into the early look of 2025's financial results. Tell us about that. So our preliminary analysis, I have to couch everything with, you know, it's preliminary. It's still early. It's subject to revisions, but our stakeholders are looking forward and so are we. The data that we see through the first two quarters of 2025 suggests that the line is expected to have another strong year with continued underwriting gains in 2025. And a net premium volume pretty similar to what we observed in calendar year 2024. So with a projected combined ratio between 85 and 93, the industry, the work comp industry, could see 12 consecutive years with a combined ratio of under 100%. It's interesting that you say that because recently we had Mark Mellusnik on the podcast and he discussed the results of our annual survey, right? Our annual carrier executives, they said that their number one concern is the financial health of the system. And that doesn't surprise me. The financial health of the system and rate adequacy are typically the top concerns. And I know that you touched on this with your in your conversation with Mark, which if the audience hasn't already listened to that episode, they should definitely should. This topic is always top of mind for the industry, but heightened economics and certainty in 2025, and in ongoing into 26, may bring about different questions than what we see in the years past. Donna, you know I appreciate a shameless plug. So we will certainly link Mark's episode and the financial results article that your team drafted in the show notes. So let's get back to business. And let's drill into the financial results just a little bit more. You mentioned that net premium volume is projected to be similar to previous years. What does that mean then for loss costs and rate filings? So in recent years and CCIs latest loss costs and rate filings have been mostly been decreases. Those declines are driven by decreases in claim frequency, coupled with growing wages that have often matched or outpaced the more moderate medical and indemnity claim cost changes. So granted the latest increase in medical severity that we reported on in 2024 is a bit of an exception. So you mentioned that loss costs and rate filings so far have been mostly decreases. Does that mean that there have been some increases? And yes, we have seen a few increases filed in 2025. Several of them we've seen are not not NCCI states. So I can't speak to them. But and our NCCI states Nevada is a great example with an increase, which reflects the uniqueness of each state. So for Nevada, the number and the severity of claims have noticeably increased over the last few years. And it's driven in part by a sustained increase in claim activity among hospitality and leisure workers. It's a significant segment that's very unique to Nevada's workforce. And wage growth particularly within this sector has resulted in increased benefit costs. Nevada's current payroll cap, which is another unique feature of the state, has suppressed premium levels while benefits are growing at an accelerated rate. So this has also put upward pressure on the loss ratios and in turn loss costs. We expect the Bureau rate and loss cost levels filed in 2025 with effective dates in 2026 to decrease about 4.5 to 5% on average across NCCI states. But as we often say, every state has a story. So overall we have been seeing decreases. Are you expecting that to continue? So in the current environment, we expect modest decreases to continue from year to year. It's worth noting that the magnitude of the declines has actually slowed down in recent years though. And why is that? So one factor that goes into that is the pace of wage growth that has eased relative to post pandemic highs. So I also want to touch on medical inflation as a component of that because medical inflation remains in line with a five year average of two and a half to three percent. We did see that medical severity in accident year 2024 grew by about 6%, which points to an uptick in utilization of medical services in workers compensation. So let's go back a bit. I heard you say or I heard you add the caveat rather of the current environment. And last time you were here, we discussed the question, right, of will there be a turn? We discussed it at great length. So I will pose it to you again today, Donna. Will there be a turn? I don't have a crystal ball in front of me, of course. I would, but I would caution our listeners that two to three states with increases does not make a turn. But based on the latest data, we do not anticipate an overall systemic change in the foreseeable future. And I want to make it clear that we continue to analyze every available metric while considering what we hear from our thousands of carrier engagements. We are always monitoring for indicators that could reveal a turn. And let's touch on that for a moment. When we spoke last year, you also mentioned a few scenarios that could be potential disruptors for the system. What are those indicators today and are they the same as last year? Yeah, the potential disruptors really haven't changed. The first is a sustained reversal of declines in frequency. So while Nevada had an increase in the number of claims, overall frequency has been declining for several decades, partly due to the increased automation and improved safety technologies in the workplaces, I think we're unlikely to see a sustained reversal in the decline in frequency. In fact, I think AI has the potential to actually accelerate the decrease in frequency. So say a little more about that. The workforce of the future actually may include robotic automation doing dangerous jobs. So NCCI continues to monitor and watch these developments examining all the potential implications such as human robot interactions at work and its effect on claim frequency. So some scenarios may seem to be in the distant future. We're keeping a very watchful eye on AI applications and their potential impact on the workforce, work place safety, and the overall work comp system. That's really interesting and certainly AI and its impacts on the workers compensation system is top of mind for industry stakeholders. Are there any other potential disruptors to the system? Now there's a few that are always on our mind and one of those is accelerating medical inflation for workers compensation. So I did mention that there was that increase in accident year 24. So we are watching that to see what's going to be shown up for 2025 results. And that may tell us, may signal something for us. Or we saw a significant shift in medical utilization in 24. We're going to see if that's sustained and see how that impacts the system. We also are watching legislative changes that can affect system kevats overall. And the last one I would mention is the economic disruption. So we don't see something like that on the horizon, but we're just always watching. Always watching. And can you share a little more about the economy as a potential disruptor? We've seen a heightened sense of economic uncertainty and hiring has slowed. Would you consider that a warning sign? That's a good question. So today we haven't seen much disruption, but the last few months of data is just becoming available due to that government shutdown. We all experienced a few months ago now. So that creates some of this uncertainty. But here's what we do know. Hiring has stagnated, but unemployment is still relatively low, around 4.3%. There's also fewer job openings. That tells us that people are likely keeping their jobs, and the rate of job losses is also low. So the weakness that we're seeing in hiring may be temporary as economic uncertainty starts to lift, and the economy continues to grow. And Donna, your team recently released a one-pager about this titled "Appropriately. Will there be a turn?" So we'll be sure to include that in the show notes. So thank you for that. It's available now on ncci.com. That's a shameless plug for you on your team. Thank you. Anything else you would like to share before we close out today? Well, I have to give my own shameless plug. Since you're all about shameless plugs, about AIS 2026. So I will be back on the main stage, delivering our first look at the full 2025 results. And I know that is always a highly anticipated session. So Donna, thank you so much for being here. I know that our listeners appreciate your insights and analysis. Thank you, Christine. And if you'd like to connect with Donna or any of our ncci experts, please reach out to [email protected]. We'd love to hear from our listeners and we look forward to responding. Thank you for listening to ncci's State of the Line podcast. We'll see you next time. This podcast is the copyrighted material of the National Council on Compensation Insurance, 2026. All rights reserved.