Workers' compensation costs vary significantly across regions within Florida, Illinois and Texas, according to analysis by the National Council on Compensation Insurance (NCCI).
The study examined claim frequency, severity, and overall costs across multiple regions within each state and found that no single factor consistently explains the differences in loss ratio relativities.
Florida exhibited wide intrastate variation in both frequency and severity. Coastal regions with high concentrations of construction and service-industry employment showed higher average claim costs, driven in part by more severe injuries and complex claims. In contrast, inland regions with smaller urban centers reported lower severity and overall costs despite similar claim frequency levels.
In Illinois, industrial and metropolitan differences strongly influenced costs. Regions centered around manufacturing hubs experienced higher claim severity, while smaller rural regions had lower costs but a slightly higher frequency of minor claims. Policies spanning multiple regions generally had elevated overall costs, reflecting exposure across areas with differing risk profiles.
Texas demonstrated substantial variation due to its geographic and economic diversity. Urban centers like Dallas-Fort Worth and Houston recorded higher severity claims in construction and oilfield sectors, while smaller regions in the Panhandle and West Texas reported lower severity but occasional high-cost catastrophic claims. Policies covering multiple regions in Texas showed higher average costs than single-region policies, suggesting that geographic spread increases exposure.
Across all three states, frequency alone was not a reliable predictor of overall cost; high-frequency regions sometimes had moderate severity, resulting in lower loss ratios, while regions with fewer claims could have much higher severity. This underscores the combined influence of workforce composition, injury mix, industry concentration, compensability structures, medical treatment guidelines, fee schedules, and attorney involvement on regional cost outcomes.
The study also highlighted that larger jurisdictions, which report more data, tend to show more stable cost trends, whereas smaller regions exhibit greater variability from year to year.
NCCI’s findings suggest that understanding these regional differences is essential for insurers and regulators to set pricing, design coverage, and manage risk effectively.
Overall, the analysis reinforces that each state contains multiple regional profiles, each influencing workers’ compensation exposure differently. Recognizing these intrastate variations allows for more precise underwriting and informed policy decisions that reflect local conditions rather than relying on statewide averages, according to the organization.
