Preparing for Change in Workers' Compensation Insurance

The workers' compensation insurance market, historically defined by its stability, is facing a raft of transformative pressures. An uncertain economy, rising wages, an aging workforce, medical cost inflation, and evolving regulations are all reshaping the sector.  

Here’s a look at the challenges workers’ compensation insurers are likely to face, how many insurers are adapting to these changes to maintain and enhance a competitive edge, and an exploration of how a digital insurance payment platform can provide a decisive advantage through improved process efficiencies and digital-first provider and claimant experiences. 

Will Stability and Profitability Continue in the Workers' Compensation Insurance Industry? 

The workers' compensation insurance industry has long stood out for its stability and consistent profitability. It has maintained underwriting profits over the past decade, with seven years of operating gains exceeding 20%, as highlighted in the 2024 "State of the Line Report¹," by Donna Glenn, chief actuary of the NCCI (National Council on Compensation Insurance). A reserve redundancy of $18 billion further emphasizes its strong financial health.  

According to the NCCI report: 

• Net written premium rose to $43 billion in 2023 from $42.5 billion in 2022, while representing just 5% of the overall Property and Casualty (P&C) insurance market.  

• The sector had a combined ratio of 86% in 2023, underscoring its efficiency compared to other P&C lines. 

• Claim frequency dropped by 8% in 2023, more than double the long-term average. 

• Claim severity rose a modest 3% in 2023, illustrating cost control amid rising wages. 

While these metrics confirm the industry’s resilience and ability to maintain profitability, compensation costs, wages and salaries, and benefit costs are rising, according to the U.S. Bureau of Labor Statistics².  

Challenges Workers' Comp Insurers Face in 2025 

Since the beginning of 2025, the U.S. economy has entered a period of increased stock market volatility and greater uncertainty around the possibility of economic recession, all of which could negatively impact the workers’ compensation market.  

And there are other factors, including: 

• An Aging Workforce: Adults age 65+ are projected to be 8.6% of the labor force in 2032, up from 6.6% in 2022, according to Pew Research³. Older workers are more prone to workplace injuries and chronic illnesses, which could contribute to higher claims frequency and increasing long-term care costs.  

• Rising Medical Costs: PwC projects an 8% year-on-year medical cost increase in 2025 for the group market and 7.5% for the individual market⁴.    

• Regulatory Changes: Evolving regulations around enhanced mental health benefits and adjustments to indemnity payments across many jurisdictions require insurers to remain agile in policy management and compliance.  

To mitigate these pressures, many insurers are implementing digital payments, like One Inc’s ClaimsPay platform, to help create operational efficiencies and improve customer experiences.  

Creating Operational Efficiencies in the Workers’ Comp Ecosystem 

Operational inefficiencies pose a significant threat to insurers, often resulting in higher administrative costs, prolonged claims resolution times, and customer dissatisfaction. Moving to a unified digital payments ecosystem helps insurers streamline these critical processes and achieve greater efficiency by offering the same digital-first customer experiences they enjoy in other business spheres.  

Further, digital payments reduce or remove the delay, expense, and potential fraud associated with paper checks⁵, which can be sizeable, and accelerate reconciliation. Plus, the opportunity to use virtual cards to pay vendors represents millions of dollars in savings to some carriers⁶. 

Enhancing Customer Experiences 

Customer experience (CX) has emerged as a key differentiator in the workers' compensation sector. Beneficiaries and vendors increasingly expect personalized, rapid, and seamless digital-first interactions, especially during essential touchpoints such as claims processing and payments. 

For example, a digital payments platform like One Inc’s offers real-time claim updates and integrates proactive communications. This transparent approach to claims payments helps insurers align with policyholder expectations and strengthen trust while improving operational efficiency. 

Functionality like One Inc’s Preselect also clarifies expectations and accelerates payments by enabling claimants and vendors to store and update payment preference details at any and every point, as defined by the insurer, in the claims process.  

Penn National: Transforming Workers’ Comp Insurance 

By providing faster and more flexible options for claimants and vendors, Penn National Insurance is reshaping workers' comp insurance. Since implementing One Inc’s ClaimsPay, Penn has achieved an impressive 84% digital adoption rate among vendors, far surpassing the 75% industry benchmark.  

From the first day of production, close to 70% of Penn National’s vendors had stored payment preferences on the One Inc Network, and they began to benefit from faster digital claims payouts and recurring electronic payments. Further, One Inc’s Vendor Outreach team managed onboarding, thus accelerating speed to value for the insurer and strengthening those relationships.  

This shift not only enhances vendor satisfaction, however. ClaimsPay's secure, user-friendly system now helps Penn National meet state-specific regulations requiring digital workers’ compensation payments while reducing the insurer’s reliance on manual, paper-based processes. 

Penn National’s success demonstrates how modern payment systems can help workers’ comp insurers improve the customer experience, maintain compliance, and set a new standard for efficiency. 

Building a Competitive Advantage 

The workers' compensation insurance industry is at a critical juncture. Rising costs, demographic shifts, and increased regulatory complexity demand innovative solutions that enhance efficiency while elevating the customer experience. 

Adopting One Inc’s platform equips insurers with the tools to address these challenges strategically. By streamlining claims and premium payment processes, increasing digital engagement, ensuring compliance, and focusing on provider communication, insurers can not only meet their operational goals but also reinforce their leadership in a competitive market. 

Strong digital payments capabilities are quickly becoming baseline requirements for insurers of all sizes and types. As the leading digital payments network for the insurance industry, we’re here to help. Get in touch. 

Sources:

1. State of the Line Report, 2024, NCCI 
2. Employment Cost Index Summary, 01/31/2025, U.S. Bureau of Labor Statistics
3. The growth of the older workforce, Pew Research Center 
4. Medical cost trend: Behind the numbers 2025, PwC 
5. How Insurance Carriers Can Shred the Cost of Sending Paper Checks, One Inc 
6. Create a Better Insurance Claim Experience with Modern Payment Technology, One Inc