WC Net Premiums Fell in 2025. A Rate Turn Is Forming.

Workers' comp has been cutting rates for over a decade. Every year, NCCI petitions state regulators on behalf of carriers for adjustments to filed loss costs and rates. For most years since 2011, those adjustments have been downward. Contractors have grown accustomed to WC pricing that gets slightly cheaper each renewal cycle.

The AIS 2026 data is the clearest signal yet that this cycle is turning.

NCI reported that WC net written premiums fell 0.2% in 2025 despite continued payroll growth across most states (NCCI AIS 2026, May 2026). Premium volume is shrinking even as the insured payroll base grows. The only way that happens is if filed rates are falling faster than exposure. And if rates are falling faster than exposure while the accident-year combined ratio sits above 100%, the industry is moving in two directions at once.

How NCCI rate filings work

NCCI acts as the rating bureau for 38 states, developing and filing loss cost recommendations that carriers use as the basis for their rates. Each year, NCCI analyzes recent loss experience, trend factors, and expected future costs to calculate whether existing rates are adequate, redundant, or deficient. Those filings go to each state's department of insurance for approval.

The filing and approval process typically takes six to 12 months from NCCI's submission to a carrier implementing revised rates. After state approval, carriers then choose how to price individual accounts relative to the filed loss cost. The net effect: when NCCI files for a rate increase, contractors don't see the impact immediately. There's a lag of 12 to 24 months from the time market conditions warrant a change to the time that change shows up in a renewal quote.

What the leading indicators show now

Several signals have converged that have historically preceded rate filing reversals in WC:

First, the accident-year combined ratio crossed above 100% for both 2024 and now 2025. Policies written in those years didn't cover their own losses on underwriting merits alone. Calendar-year results look better because prior-year reserve releases are masking the underlying performance.

Second, reserve redundancy has declined two consecutive years, from $16 billion to $14 billion (NCCI AIS 2026, May 2026). The cushion that's been flattering calendar-year results is thinning. The reserve release support for below-market pricing is diminishing.

Third, lost-time claim frequency improvement slowed to 2% in 2025, below the historical 3 to 4% trend, while severity rose 4%. The natural offset that made soft-market pricing sustainable, fewer claims each year, is weakening.

Fourth, net written premiums are shrinking even as payrolls grow. The industry is collecting less premium on more exposure. That's not a sustainable position when accident-year losses are already above collected premium.

When the last rate turn happened

The WC market went through a significant hardening cycle in the early 2000s following several years of inadequate pricing in the late 1990s. NCCI filed for substantial rate increases across multiple states starting around 2000 to 2002. Contractors who entered those renewals with elevated mods faced compounding effects: higher base rates multiplied by modifiers above 1.00, in a market where capacity tightened simultaneously.

The current situation isn't that severe. Reserve redundancy still exists at $14 billion. Many carriers are still profitable. The difference is that all the indicators are pointing the same direction at the same time, which is unusual for a market that has had 12 consecutive calendar-year combined ratios below 100%.

What it means for contractors at renewal

In our reviews of Southeast contractor worksheets, the question of “when will pricing turn” matters less to individual contractors than the question of “what's my mod going into the turn.” When base rates rise, the mod is the multiplier. A 1.20 mod in a flat-rate environment produces one premium. The same 1.20 mod applied to a base rate that has increased 10% produces a meaningfully different result. The modifier's leverage increases as the base moves up.

The window for getting a worksheet reviewed, correcting classification errors, and closing stale reserves is before the rate cycle shifts, not after.

What an audit would check

An audit identifies whether the Experience Modification Rate on a contractor's current worksheet reflects accurate underlying data: correct classifications, current claim values, properly attributed payroll. In a stable rate environment, a mod error of several points is significant but bounded. In a rising-rate environment, the same mod error compounds against a higher base. Both inputs move in the same direction when the rate cycle turns. Correcting the mod before rates adjust is where the compounding works in the contractor's favor instead.

If your next renewal is within 18 months, send us your NCCI worksheet and we'll review whether what's on your worksheet matches what should be there.