Workers’ Compensation: Stable market with emerging challenges from mental health claims

The approach of Labor Day presents a fitting opportunity to reflect on a key pillar of worker protection, as well as on a mandatory requirement for most employers: Workers’ Compensation Insurance. 

In the market for property and casualty insurance, Workers’ Compensation has consistently outshined all other lines of coverage. 

As reported in Alera Group’s 2024 Property and Casualty Market Outlook, “Workers’ Compensation business will continue to be targeted for growth by most commercial lines insurers. This line of business is on track to deliver its seventh consecutive year of underwriting profits.”

Workers’ Compensation insurers have consistently achieved the remarkable industry benchmark of a combined ratio below 100, meaning they’ve maintained combined claims and expenses dollar totals lower than the amount in premiums collected.

Despite pressure from medical inflation, increases in fee schedules on medical procedures and wage inflation affecting premiums and benefits, Workers’ Compensation remains a stable and profitable line for insurers. This stability allows buyers favorable conditions, such as ample capacity and stable rates. 

However, a new trend is emerging: the inclusion of mental health claims as compensable workers’ compensation. This shift from the traditional focus on physical injuries could introduce new significant changes to Workers’ Compensation. 

Emerging mental health regulations in Workers’ Compensation

States are increasingly recognizing mental health conditions, such as post-traumatic stress disorder (PTSD), as occupational injuries compensable under Workers’ Compensation. Initially focused on first responders and healthcare providers during the pandemic, this trend is expanding. 

For example, Connecticut recently passed legislation granting Workers’ Compensation benefits to all employees if they are diagnosed with PTSD following work-related incidents, such as witnessing death or traumatic physical injury or helping to treat or transport an injured employee. 

However, the American Property Casualty Insurance Association (APCIA) cautioned lawmakers that PTSD claims are often harder to prove and may not align with the no-fault framework of Workers’ Compensation.

Despite these challenges, momentum is building for employers to address mental health issues as part of their responsibilities to employees, whether linked to Workers’ Compensation or employee benefits. This trend introduces complexities for insurers because mental health claims can be difficult to validate, potentially increasing Workers’ Compensation claim severity and frequency. 

Mitigating risks through wellness and safety programs 

As the scope of Workers’ Compensation evolves, employee wellness programs that promote physical and mental health are key to reducing workplace injuries. Healthier employees are less prone to injuries and mental health issues, lowering claim risks. A strong wellness program creates a supportive work environment where employees feel valued and have access to necessary resources — which is why Alera Group offers its annual Employee Wellbeing Fair as a free benefit for employers to offer their workforce.

Citing a survey by U.S. Corporate Wellness, PropertyCasualty360 reports that bridging Workers’ Compensation and employee benefits can optimize employee health and organizational success. Wellness programs can reduce Workers’ Compensation and Disability Insurance claims by up to 30%. 

Safety education and training are equally critical for preventing on-the-job accidents and mitigating post-injury mental health issues. As mental health claims gain traction in Workers’ Compensation, prioritizing employee wellness and safety programs provides stability in this evolving landscape. 

The role of AI in risk management

Artificial intelligence (AI) is becoming a powerful tool for managing Workers’ Compensation claims. Initially used for predictive modeling, AI now monitors open claims and supports rehabilitation efforts for a safe and swift return to work. This technology helps control claim severity, reduce medical expenses and expedite claim closure. 

AI also enhances fraud detection and identifies comorbidities, such as diabetes or high blood pressure, which can complicate claims. Early recognition of these patterns enables effective claim management.

(To learn how a tech solution can improve your employee benefits design and implementation, register for our upcoming webinar Is Tech-Enabled Brokerage Right for You?)

Improving the marketability of challenged accounts 

If you have a history of severe or frequent claims, focus on the following three claim management areas to improve your Workers’ Compensation marketability with underwriters.

1. Effective communication: Establish immediate, clear communication when a claim occurs. Ensure that employees feel supported and have access to guidance throughout the process. This reduces the risk of a claim escalating or the employee hiring an attorney. 
2. Timely reporting: Use tools such as nurse triage programs for prompt claim reporting. Quick reporting enables efficient claim management and timely intervention, minimizing claim impact and reducing costs.
3. Return-to-work program enhancements: Strengthen your return-to-work program by customizing it to your business’s needs. Offering light-duty jobs, even if unrelated to the employee’s previous role, keeps injured workers engaged, accelerates recovery and reduces the financial strain of prolonged absences. 

Proactive claims management not only benefits an organization’s underwriting application but also supports employee safety. 

Choosing the right broker

Select a broker who specializes in Workers’ Compensation, and understands your specific business sector and emerging industry trends. State regulations heavily impact Workers’ Compensation, making it essential to work with a specialist. 

Ask about the broker’s in-house claim consultants. Do they offer advisory services representing both the injured employee and the employer? Do they have experience with common industry-specific losses? In-house claim consultants can facilitate recovery and return-to-work by partnering closely with insurance company adjusters. 

Finally, consider a broker who offers coverage strategies such as leveraging Workers’ Compensation to secure more challenging lines, including Property and Auto Insurance. Negotiating a bundled program can help secure the most favorable rates across all policies. 

CONTACT A WORKERS’ COMPENSATION INSURANCE SPECIALIST

About the author

Brandon Adams, AAI, ARM, CPCU
Director, Senior Care West
Propel Insurance, An Alera Group Company

With more than 20 years of experience in the insurance industry, Brandon Adams is an expert in innovative risk transfer and strategic risk management solutions. He is dedicated to helping clients succeed by reducing their total risk exposure and enhancing financial transparency. Brandon specializes in creating tailored programs and insurance strategies for large and midsize companies, focusing on consultative sales, customer retention and business development. His expertise includes risk-transfer products, loss-sensitive insurance programs and commercial insurance. 

Contact information:

• brandon.adams@aleragroup.com
• Connect with Brandon on LinkedIn