The Workers’ Comp Market May Be Overdue for Hardening. Be Prepared.

July 21, 2022

So, here we are, almost three years into the hard market for Property and Casualty Insurance and 2½ years into the COVID-19 pandemic, and Workers’ Compensation continues to defy market gravity while COVID remains, lurking relentlessly as a menacing presence. Is Workers’ Comp due for a COVID-influenced market correction?

In a May story titled “A Shining Star in the P/C Sky, but the Future Is Less Bright as Workforce Changes,” Insurance Journal Editor-in-Chief Andrea Wells wrote: “Workers’ compensation rates have been trending down for years as a result of a decline in frequency and a stronger focus on safety in the workplace, according to Mark Wilhelm, chairman and CEO of Safety National, a specialty insurance and reinsurance company, and a member of Tokio Marine Group. But there are pressures and unknowns on the horizon due to today’s economic environment and how risks from the pandemic might unfold, he added.”

“We’re in an era now of less certainty in Workers’ Compensation,” Wilhelm told Wells.

We at Alera Group said as much in early 2021, when we reported, “Workers’ Comp Market Stable, but Uncertainty Looms.” And as recently as July 19 of this year, Risk & Insurance Magazine proclaimed, “Workers’ Comp Is Doing Great. But That Doesn’t Mean We Can Ignore the Risks Our Line Still Faces.”

What are those risks? Well, COVID for starters. Much of America has moved on from the virus, but it has not moved on from us, and the disease continues to have an impact on such Workers’ Comp factors as labor shortages, remote work, physical and mental health, and medical inflation. What’s more, while new variants and subvariants such as BA.5 perpetuate the pandemic, there’s still much we don’t know about long COVID and its implications for Workers’ Compensation Insurance.

Waves of new claims caused by work-related long COVID, injuries arising from worker inexperience and further spikes in medical costs all could tip Workers’ Comp into hard-market territory.  

Market Conditions for 2022 and Beyond

When Alera Group released its Property and Casualty 2022 Market Outlook back in December, we predicted that Workers’ Compensation Insurance would remain a targeted line of business for most insurance carriers — with ample availability and stable conditions for rates, capacity and underwriting scrutiny. Our forecast included the following:

  • Rates will increase, but only modestly. Helping to offset the need for higher rates are a favorable claim frequency, fewer employees working in 2021, higher wages for the same exposures and generally adequate loss reserves. Offsetting these benefits are inflationary costs, expected increased claim frequency as the economy improves and more untrained workers are hired, and a larger number of severe claims resulting from an older workforce. Industry uncertainties include the potential for new claims arising from a greater number of people working from home, and potential repercussions from employer-mandated vaccines.

  • Coverage will be broadly available in most states and for most classes. Because of the desirability of this line of business, most insurers licensed to write Workers’ Compensation will actively solicit accounts even when they do not write other lines of business for the insured. Companies that have previously avoided writing this business are now actively pursuing it.

  • Capacity will remain in sufficient supply. Because of carriers’ increased interest in growing their market share, adequate surplus and capacity will be available to meet the needs of virtually all businesses.

  • Underwriting scrutiny will be thorough. Insurers will require complete submissions with accurate loss histories, and will be considering the adequacy of hiring practices, training, safety and “return to work” programs, and employment of inexperienced and older workers. Industries likely to be most extensively scrutinized are those experiencing a shortage of skilled workers, including transportation, manufacturing, healthcare and construction.

Despite all that’s happened since the Market Outlook’s release — new spikes in COVID infections, Russia’s invasion of Ukraine, soaring inflation and more — our forecast for Workers’ Compensation remains pretty much the same, albeit with the caveat to be wary of the long-term effects of COVID and other, extraneous factors.

What You Can Do

Perhaps the biggest contributing factor to the market stability for Workers’ Comp is a widespread embrace of risk management policies and procedures, combined with increased adoption of a holistic approach to getting injured employees back to work.

While the stricter underwriting practices instituted in response to the hard market for P&C coverage probably are here to stay, businesses with strong risk management programs and positive claims experience are equipped to withstand underwriter scrutiny. Do a good job with your risk management program, document its effectiveness, and underwriters are likely to approve.

To help prevent the spread of COVID-19, the federal Centers for Disease Control and Prevention (CDC) offers a flyer suitable for distribution and display in the workplace: HOW TO PROTECT YOURSELF AND OTHERS | COVID-19.

If an employee does become injured or contracts illness on the job, treat the injured worker as a human being, rather than as a commodity. Not only will you engender good will from your team, you’ll get the injured employee back to work more quickly and effectively than you would with a strictly utilitarian approach. Doing this requires four basic steps:

  1. When an injury occurs, file a workers’ compensation claim as soon as possible, following your state’s reporting rules.

  2. Make sure your Workers’ Compensation Insurance carrier or third-party administrator (TPA) promptly contacts the injured worker regarding next steps.

  3. Have a supervisor or HR administrator contact the employee to provide assurance that the company is addressing all needs related to the injury or illness. Let the employee know you care.

  4. Focus on doing what’s necessary to get the employee back to health.

One more recommendation: Register for the upcoming Alera Engage webinar on key benefits compliance issues for Q3. Each quarter, compliance experts from Alera Group’s Employee Benefits division provide updates and advice on regulations and topics that may affect your business. On Thursday, August 18, we’ll discuss what you need to know in Q3 and take questions as time allows. To register, click on the link below.


About the Author

Kathy Miller

Workers' Compensation Risk Strategist

GCG, an Alera Group Company

A former Workers’ Compensation claims adjuster, Kathy Miller brings multiple perspectives to her current role as clients’ initial resource for all Workers’ Comp-related issues, including return to work. As Workers’ Compensation Risk Strategist, she advocates on behalf of clients while working with adjusters to ensure client employees receive proper medical treatment, accurate reserve setting and swift claim resolution.

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