What’s the Current State of Workers’ Comp? Small, but Mighty: Hartwig

Conference Insights

With wildfires, hurricanes, inflation, and uncertainty marking the past 10 years, property and casualty insurance has experienced a "decade of woe." But the bright spot amid the turmoil has been workers' compensation, according to Bob Hartwig of University of South Carolina's Darla Moore School of Business during WCRI's annual conference.

"Workers' comp is materially smaller than it used to be, but it's mighty." Hartwig said during WCRI's day 2 keynote session. "Workers' comp has served as a calm and stable refuge."

For insurers, that stability offers a welcome "boring" contrast to the catastrophes, litigation, and torts that have driven up costs for P&C lines.

"P&C dug itself into a deep, deep hole, but workers' comp is helping to fill that hole," Hartwig said.

What about the Money?

As frequency has declined in recent years, so have workers' compensation premiums, which have shrunk by 50% since 2015.

If that's the case, is there still money to be made in workers' compensation insurance?

"How profitable is workers' comp these days?" Hartwig said. "It's a beautiful picture because you see workers' comp with low levels of profitability 15 years ago, but it has steadily improved, which is why we say it's small but mighty."

Will workers' compensation stay profitable? It might depend on bigger-picture issues.

"I expect the industry to be joined at the hip with the economy," Hartwig said.

The Future

As far as where the economy might be headed, Hartwig noted that recent job gains have all been in the healthcare sector, and shrinking employment will impact workers' compensation.

"Total benefits have been decreasing," Hartwig said. "But health benefits have soared about 6.5%, which is the largest increase in about 20 years."

And any talk about the future of the economy or the industry can't escape the prospect of AI.

"Anything that bites into the labor market is going to bite into workers' compensation," Hartwig said.

And while noting that AI might pose a threat to some white-collar roles, fears that AI is going to send everyone to unemployment might be unjustified.

"Construction of data centers is up, fueling blue-collar job growth," Hartwig said. "And we see wages rise, even for AI-exposed occupations."

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