Employment and wage growth could lead to more premiums for workers compensation insurers, but may also contribute to increased comp claim frequency and severity, the National Council on Compensation Insurance Inc. said in its quarterly economics briefing. 

The Boca Raton, Florida-based ratings and research organization said in the report released Tuesday that employment growth is projected reach 2% this year and 1.6% next year.  Meanwhile, average weekly wages are projected to increase by 2.2% this year and 4.2% next year, NCCI said. 

“Growth in both the average weekly wage and in employment will lead to increases in private sector payrolls and (workers comp) premiums,” the report reads. “Wage growth also increases (workers comp) indemnity severity.”

NCCI provides projections on economic factors that impact the workers comp market based on data from Moody's Investors Service Inc. and the U.S. Department of Labor.

The professional and business services, education, and health care sectors added the most jobs this year, while employment in mining and manufacturing has declined, NCCI said. 

“The manufacturing industry group accounts for 16% of manual premium in NCCI states, so the drop in manufacturing employment is concerning for workers compensation. Construction is also important to workers compensation since the contracting industry group, which has posted a small increase this year, makes up 24% of premiums in NCCI states,” according to the report. 

While NCCI expects overall job growth, the rating agency said the addition of "inexperienced workers may also put upward pressure on (workers comp) claim frequency."

NCCI noted that workers comp claim medical severity declined nationwide last year, driven in part by decreased medical service utilization. However, the report said medical cost inflation is expected to reach 3.9% this year and 3.7% in 2017, according to Moody's data.

"Moody’s forecasts imply upward pressure on medical cost per claim," the report reads. "However, if medical utilization continues to decline, as it did in 2015, then the overall change in workers compensation medical severity could be quite different from medical inflation."