The Zacks Accident and Health Insurance industry is expected to benefit from an increase in underwriting exposure. Aflac Incorporated AFL, Trupanion TRUP and Globe Life. GL are expected to be driven by prudent underwriting standards. However, higher inflation, as well as rising medical costs, could offset the positives. The industry has been witnessing soft pricing over the past several quarters, and this is not expected to change anytime soon. Nonetheless, a rise in claims of lower severity is likely to favor pricing. Also, the increasing adoption of technology in operations will help the industry function smoothly. The industry is witnessing a rise in demand for embedded insurance and supplemental health products.
Per a CBIZ report, the industry has maintained its profitability streak, reflecting solid reserves, prudent claims management, stable loss trends and fewer claims, though Fitch Ratings predicts a softer performance in 2025.
About the Industry
The Zacks Accident and Health Insurance industry comprises companies providing workers’ compensation insurance, mainly to employers operating in hazardous industries. These companies offer group, individual or voluntary supplemental insurance products. Workers’ compensation is a form of accident insurance paid by employers without affecting employees’ pay. Claims are generally met by insurers or state-run workers’ compensation funds, benefiting both employers and employees. While it boosts employees’ morale and, in turn, productivity, employers stand to benefit from lower claim costs. As awareness about the benefits of having such coverage rises, the future of these insurers seems bright. Per Precision Reports, the global workers’ compensation insurance market is expected to grow considerably between 2024 and 2032.
3 Trends Shaping the Future of the Accident & Health Insurance Industry
Pricing Pressure to Continue: The workers’ compensation industry has been witnessing pricing pressure over the past several quarters. Inflation, coupled with rising medical costs and demographic changes, will likely continue to put pressure on pricing. While recent Fed reports state that inflation is expected to stay at 2.7% this year, per a Leavitt Group report, the Centers for Medicare and Medicaid predicts healthcare spending to increase by 5.4% each year through 2028. Given rising medical costs, the need for supplemental health plans is on the rise. Per a report in Commercial Risks, AM Best expects sustained favorable loss development and beneficial loss frequency to put downward pressure on pricing. Efforts to retain market share will further increase pricing pressure, which might curb top-line growth. With commercial and industrial activities back on track, demand for insurance coverage is likely to rise. SpendEdge estimates that workers’ compensation insurance pricing will increase at a five-year (2022-2026) CAGR of 5.3%. Also, per a CBIZ report, workers’ compensation pricing is expected to rise 2%.
Improvement in Claims Frequency: The adoption of safety measures and improving working conditions are lowering claims. The accident and health insurance space has witnessed growth over the years, primarily driven by an increase in benefits offered by employers. The right kind of workers’ compensation policy translates into personal care for injured workers, increased productivity, higher employee morale, lower turnover, reduced claims costs and less financial worry amid rising medical costs. Increasing underwriting exposure and a consistent decrease in claims frequency rates, attributable to a better working environment and conservative reserve levels, have been boosting the industry’s performance. Per the Bureau of Labor Statistics, in the next 10 years, the number of workers aged 75 and more is expected to increase by 96.5%. Thus, claims could rise given an increase in work-life span and the degree of severity, the report states.
Increasing Adoption of Technology: The industry is witnessing accelerated adoption of technology in operations, including the use of artificial intelligence. AI, data analytics, automation, cloud computing and blockchain should help insurers gain a competitive edge. Machine learning and predictive analytics enable real-time risk profiling. Policies are increasingly bundling telehealth services. Per a CBIZ report, industry data reveals that artificial intelligence could reduce workers’ compensation claim expense by about 45%. Nonetheless, higher spending on technological advancements will result in escalated expense ratios.
Zacks Industry Rank Indicates Weak Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates bleak near-term prospects. The Zacks Accident and Health Insurance industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #227, which places it in the bottom 7% of the 251 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. The Zacks Consensus Estimate for 2025 has declined 2.5% in a year.
Before we present a few stocks one can buy or retain, given their business advancement endeavors, it’s worth taking a look at the industry’s performance and current valuation.
Industry Underperforms Sector and S&P 500
The Accident and Health Insurance industry has underperformed its sector and the Zacks S&P 500 composite year to date. The stocks in this industry have collectively gained 4.5% year to date compared with the Finance sector’s increase of 12.2% and the Zacks S&P 500 composite’s increase of 10.1% over the same period.
Current Valuation
On the basis of a trailing 12-month price-to-book (P/B), commonly used for valuing insurance stocks, the industry is currently trading at 1.82X compared with the Zacks S&P 500 composite’s 8.42X and the sector’s 4.26X.
Over the past five years, the industry has traded as high as 2.14X, as low as 0.76X and at the median of 1.71X.
3 Accident & Health Insurance Stocks in Focus
We are presenting three Zacks Rank #3 (Hold) stocks from the Zacks Accident and Health Insurance industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Aflac: This Columbus, GA-based company offers voluntary supplemental health and life insurance products and operates through Aflac Japan and Aflac U.S. The top line benefits from strategic growth investments, robust persistency rates and enhanced productivity. Aflac introduces new products and upgrades existing ones to address the changing needs of its customers, as well as integrates digital solutions into its offerings to align with the ongoing trend of digitization. This, in turn, should support strong profit margins. The Argus buyout will provide it with a platform to build the company’s network of dental and vision products and further strengthen its U.S. segment.
AFL delivered a trailing four-quarter earnings surprise of 6.57% on average. Though the Zacks Consensus Estimate for 2025 earnings indicates a year-over-year decrease of 5.3%, the same for 2026 implies an increase of 7%. The consensus estimate for 2025 and 2026 earnings has moved up 1.2% each in the past 30 days. The expected long-term earnings growth rate is pegged at 5.2%.
Trupanion: Headquartered in Seattle, WA, Trupanion is a provider of insurance for cats and dogs in the United States, Canada, Continental Europe and Australia. It operates in a total addressable market worth $34.1 billion, which is a large but underpenetrated market. This pet insurer is well-poised to grow, courtesy of its heightened focus on pets’ health and well-being in an underpenetrated pet insurance market, product launches, extended operating boundaries and a solid capital position. This pet insurer continues to invest in areas where it believes it can achieve high internal rates of return. Improving pricing should add to its upside.
The Zacks Consensus Estimate for 2025 earnings indicates a 252.2% increase, while the same for 2026 suggests a 7.6% decrease on a year-over-year basis. TRUP delivered a trailing four-quarter earnings surprise of 243.75%, on average. It has a Growth Score of A. The consensus estimate for 2025 and 2026 has moved up 775% and 18.5%, respectively, in the past 30 days.
Globe Life: Based in McKinney, TX, Globe Life is an insurance holding company providing individual life and supplemental health insurance to lower-middle to middle-income households throughout the United States. Globe Life has been witnessing a positive trend in revenues, driven by premium growth in its Life Insurance and Health Insurance segments and net investment income.
The strong performance of the American Income and Liberty National divisions should drive the top line in the future. Liberty National is likely to continue to benefit from improved productivity and agent count. GL’s expansion initiatives to capture heavily populated and less penetrated areas should drive growth in the future. Net life sales, as well as net health sales, are expected to grow in the mid-teens for Liberty National.
GL delivered a trailing four-quarter earnings surprise of 2.77% on average. The Zacks Consensus Estimate for 2025 and 2026 earnings indicates a 15.8% and 5.4% year-over-year increase, respectively. The consensus estimate for 2025 and 2026 earnings has moved up 5.4% and 0.9%, respectively, in the past 60 days.
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