Workers compensation rates are falling for most policyholders nationwide as the line’s loss experience improves, the recovering economy boosts premium volume and insurers increasingly battle for new business, market sources say.

Insurers entering the workers comp market or adding new comp products in the past two years, as well as insurers looking to expand existing books of business, are driving a softening cycle that began in early 2015. Along with policy rate reductions for policyholders, underwriters are dangling concessions to attract new business, such as easing collateral terms for large-deductible comp programs, observers say.

“There are a lot of hungry markets out there that are trying to grow their business,” said Pamela Ferrandino, executive vice president and senior principal with Willis Towers Watson P.L.C.’s national casualty practice in Hartford, Connecticut. “It’s a good time to be an insured.”

Comp insurers generally are highly capitalized, and “their balance sheet allows them to have a little wiggle room on pricing reductions,” said Gordon M. McLean, a senior financial analyst with A.M. Best Co. Inc. in Oldwick, New Jersey.

The Boca Raton, Florida-based National Council on Compensation Insurance Inc., which provides workers comp ratemaking services for 38 states, has so far submitted late 2016 and 2017 rate filings for 22 states. Of those filings, NCCI has recommended workers comp advisory rate reductions in 21 states, according to Peter Burton, NCCI’s senior division executive for state relations. Those rate filings, which must be approved by state insurance regulators, have advised double-digit rate decreases in seven states and single-digit decreases in 14 states, Mr. Burton said. NCCI recommended a 1.3% workers comp rate increase for Hawaii.

Mr. Burton attributed the rate reductions partly to improved workers comp insurer performance. Combined ratios for private comp insurers declined to 94% in 2015, down from 100% in 2014 and a far cry from the 115% combined ratio that insurers experienced in both 2011 and 2010, according to NCCI. For state comp funds, the combined ratio improved to 107% last year from 116% in 2014.

An average 3% drop in the frequency of lost-time claims last year and a moderation in medical cost increases helped improve market performance, along with a gradually improving economy that produced a fifth straight year of workers comp net written premium growth nationally, Mr. Burton said. Net premiums for private insurers and state funds totaled $45.5 billion last year, up from a post-2008 low of $33.8 billion in 2010, according to NCCI.

Large insurers are pursuing workers comp programs more aggressively than in recent years, market sources agree.
“It’s a healthy-to-soft market,” with rates likely to hold steady or trend downward in coming months, said John Liston, area senior vice president with Arthur J. Gallagher & Co. in Tampa, Florida.

Willis’ Ms. Ferrandino said she is seeing workers comp policy renewal quotes ranging from reductions of 5% to increases of 2.5%, depending on the state and particulars of a policyholder’s business.

For companies with large-deductible programs, insurers are also offering concessions on collateral used to secure payments within the deductible. Some, for instance, are allowing deductibles to be secured with surety bonds, which are less expensive for policyholders than traditional bank letters of credit, Ms. Ferrandino said.

Policyholders can also negotiate a “buy-down” of collateral requirements, reducing the collateral amount in exchange for a one-time fee paid to the insurer, said Daniel Aronson, U.S. primary casualty placement leader with Marsh L.L.C. in New York.

“Collateral terms are more aggressive than I’ve ever seen them,” Mr. Aronson said.