Steve Bell, VP Underwriting & Sales, Lovell Safety
Just when you think New York workers’ compensation loss costs cannot go much lower, they do.
Effective October 1, 2026, New York has approved an average 21.9% reduction in workers’ compensation loss costs. This is the tenth consecutive year of statewide average loss cost decreases and another significant reduction in what has become a very long-term trend.
The obvious question is: What continues to drive loss costs down, and how long can it continue?
There is no single answer, but the biggest factor continues to be fewer claims. The Rating Board’s five-year analysis shows an annual claim frequency trend of -6.1%. Claim costs are still increasing, indemnity severity increased 1.9% annually and medical severity increased 3.0%, but claims are occurring less frequently.
At the same time, wages continue to increase. The Rating Board used expected annual wage growth of 4.3% in developing the new loss costs. Since workers’ compensation loss costs are generally applied to payroll, rising wages combined with declining claim frequency can substantially reduce the amount needed for every $100 of payroll.
The numbers behind this year’s filing make that pretty clear. Looking just at the latest two policy years of loss experience, the indicated change was only a 1.1% decrease. The much larger reduction comes from the projected relationship between claim frequency, claim severity and wage growth. Taken together, the Rating Board calculated a total trend factor of -23.2%.
This Has Been Going on for a Long Time
The 21.9% reduction gets your attention because of its size, but the bigger story is how long this has been going on. We have now had ten consecutive years of loss cost decreases.
It is also important to distinguish between loss cost and premium. An employer can receive a significant loss cost decrease without seeing the same percentage decrease in its actual premium. Payroll may be increasing, and experience modifications, classifications, CPAP, and other rating factors can all affect the final cost. Your carrier may also move you to another subsidiary with a higher loss cost multiplier. All these items impact your final cost, but if your workers’ compensation costs didn’t go down this year, you should be asking why.
Still, there is no question that the underlying cost of workers’ compensation in New York has come down significantly.
What We Have Seen in Our Safety Groups
What I find particularly interesting is what has happened in our safety groups during this same period. Our groups have absorbed the same continuing statewide loss cost decreases without increasing the loss cost multiplier to offset those decreases. At the same time, we have been able to increase average upfront discounts and continue returning favorable underwriting results to participating employers through dividends.
To date, more than $1.31 billion in dividends have been returned to participants in Lovell-managed safety groups.
I think that is an important part of the story because of how safety groups are structured. The groups are nonprofit in nature. Lovell manages them for a flat service fee. We do not receive a percentage of the underwriting profit. When a group performs well, the benefit of that favorable underwriting result remains with the group and can ultimately be returned to its participants through dividends.
Of course, dividends are never guaranteed, and results can vary from year to year and from group to group. But well-managed groups with disciplined underwriting, effective loss control and appropriate reserving can produce favorable underwriting results and consistent dividends over time. When that happens, the participating employers are the ones who ultimately benefit.
Lower Loss Costs Don’t Mean Safety Matters Less
There is also another side to all these loss cost reductions. Every time loss costs go down, there are fewer premium dollars available to pay claims and expenses. A 21.9% reduction is significant. It means underwriting, safety and claims management become more important, not less important.
You cannot continually take loss cost out of the system without also having the loss results to support it. That is why we continue to focus so heavily on underwriting, safety and accident prevention, claims oversight and getting injured employees back to work.
The same applies to the safety groups themselves. A group cannot depend on favorable statewide loss costs to produce good results. It still has to select the right risks, price right, prevent losses, manage claims, and maintain appropriate reserves. That discipline is what allows a group to continue performing even as the amount of premium being collected declines.
How Much Further Down Can Loss Costs Go?
That is probably the most interesting question now.
I certainly would not assume that reductions of this size can continue indefinitely. Claim frequency cannot decline forever, and there are still pressures moving in the other direction. For example, increases in maximum and minimum weekly benefits added approximately 2.4% to the Rating Board’s overall loss cost indication.
For now, though, the numbers continue to support lower loss costs.
The 21.9% reduction effective October 1, 2026, is the latest and largest chapter in what has been a remarkable 10-year period for New York workers’ compensation. From our perspective, what is just as interesting is what has happened alongside those decreases. Our safety groups have absorbed years of declining loss costs while average discounts and dividends have increased.
That tells me something important about the safety group model. When you combine lower underlying workers’ compensation costs with disciplined underwriting, strong safety and claims management, and a nonprofit structure where favorable underwriting results are returned to the participants, well-run safety groups can continue to be market leaders in both price and service, even in a market where loss costs just keep going down.
For more information on New York Workers’ Compensation Loss Costs, please reach out to Steve Bell, VP Underwriting & Sales, Lovell Safety at 212-709-8832, email SBell@LovellSafety.com or visit online at www.LovellSafety.com.