As 2021 approached, Workers’ Compensation insurance was a national outlier in an otherwise hard market for Property and Casualty insurance, showing only a narrow range between moderate decreases and increases in rates while remaining stable in terms of availability, capacity and underwriting scrutiny/selectivity.
But uncertainty loomed, amid questions arising from COVID-19.
- To what extent would states expand Workers’ Compensation coverage for employees who contracted the disease?
- What would be the implications of employers’ COVID-19 vaccination policies?
- What are COVID-19’s long-term effects?
- How will the expansion of telemedicine affect Workers’ Compensation coverage?
- When will rates shift to those consistent with a hard market?
Outlook Heading into 2021
Here’s the general landscape for Workers’ Compensation insurance as outlined in Alera Group’s Property & Casualty 2021 Market Outlook:
► This major line of the Property and Casualty sector continues to perform as an outlier by producing profitable underwriting results.
► Capacity and availability remain unchanged.
► Rates have remained fairly stable for several years and in some states are now rising modestly to reflect the drop in insurers’ investment income and an increase in the average cost of claims involving lost work-days.
► Payroll-based premiums have been suppressed as a result of governmental mandates to close or reduce business activities due to COVID-19.
► Going forward, this line of business faces uncertainties related to:
- The potential impact from employee claims as a result of contracting COVID-19;
- A greater number of people working from home;
- Increases in claims frequency emanating from a growing economy and consequentially inexperienced workforce;
- Questions around suppressed premiums, which could ignite competition to produce more premium to replace revenue lost due to reduced worker hours and more staff working from home, where hazards are thought to be lower than at many on-site locations;
- Potential legislation clearing a path to Workers’ Compensation being the employee’s remedy for COVID-19 and future communicable disease outbreaks. There is some good news: The outlook is generally positive for Workers’ Compensation, as well as for Property coverage.
- The ongoing challenge of an aging workforce.
To obtain the entire Property & Casualty 2021 Market Outlook whitepaper, click the button below.
Evolving Conditions Due to COVID-19
So, what’s happened since Alera Group released the Market Outlook in December 2020?
Telemedicine, or telehealth – a subject Alera Group colleague Paul Curtis of Phalanx Healthcare Solutions addressed in his recent article on the property and casualty insurance outlook for the healthcare industry – has expanded exponentially during the pandemic. State regulations, provider requirements and carrier reimbursement arrangements for telemedicine, meanwhile, are in various phases of catch-up.
PropertyCasualty360 earlier this week ranked telemedicine services No. 1 among its “Three key 2021 workers’ comp trends to watch.” Citing a study by the National Council on Compensation Insurance (NCCI), the publication reported:
“There will continue to be questions in 2021 as to how COVID-19 will impact the utilization and accessibility of telemedicine services for workers’ comp, including whether certain states will elect to adopt/implement permanent telemedicine regulations and provisions, how certain provider requirements may change, and how carriers will be reimbursed for services — to name just a few.”
State regulations also vary – in terms of both adoption and scope – in how they address whether COVID-19 is presumed to be a workplace illness. One encouraging development: In California, a state with one of the highest COVID-19 infection rates in the country, the state insurance commissioner recently declined the Workers’ Compensation Insurance Rating Bureau’s request to increase rates.
As the nation steps up distribution and administration during Phase I of mass vaccination, employers are scrambling to determine what kind of policies to implement and what the ramifications might be for their organization. Gary Pearce, Detroit-based chief risk architect at risk management consultancy Aclaimant Inc., summed up the situation in an interview with Business Insurance.
Employers “need to recognize that if they do impose a vaccination mandate that it’s likely that they are going to have to pay for the vaccination, that this will be compensable work time, and … medical complications in a mandatory vaccination environment are going to be under workers’ compensation and be covered,” Pearce said.
What You Can Do
Protecting your organization with a cost-effective insurance program should be a proactive process. Here are some steps you can take to address the hidden costs of workplace accidents, contain Workers’ Compensation insurance now and prepare for an eventual increase in rates:Be prepared to answer detailed questions during the renewal period. Although underwriting scrutiny and selectivity have remained relatively stable regarding Workers’ Compensation insurance, early indications in 2021 are that carriers are becoming more selective. Being able to demonstrate a comprehensive and effective risk management program, including COVID-19
- health and safety protocols, will make you more attractive in the Workers’ Comp marketplace, and help you secure more favorable policy premiums, terms and conditions.
- Consider creating or joining a Captive Insurance program. Even with carrier rates beyond their control, businesses may be able to step away from the status quo to gain more control of their Workers’ Compensation program, including the ability to further reduce the total cost of risk. By becoming an owner of insurance and not a buyer, an employer in a captive program can turn a liability into a profit center.
- Register for Alera Group’s Monday, January, 25 webinar, “COVID-19 Vaccines & More: Practical Guidance for Employers.” During the presentation, you’ll receive information on regulations regarding vaccines, along with guidance on safe and effective work practices. Topics will include:
- Incorporating updated Families First Coronavirus Response Act (FFCRA) and other regulations into your policies and practices
- Considerations for developing vaccination policies
- Adapting short- and long-term remote and on-site workforce strategies.
The last segment of the webinar will be devoted to a panel discussion, during which you’ll have the opportunity to ask questions of Alera Group HR experts and leaders of medium- and large-sized companies who are managing COVID-19 on the front lines across multiple industries and states.
About the Author
Stephen Paulin, CIC
Risk Strategies and Workers’ Compensation Practice Leader, Orion Risk Management
Steve Paulin, CIC, has more than 35 years of experience as a risk strategist helping privately held, mid-market businesses in Southern California reach their profit goals by improving risk management outcomes that optimize the insurance program’s financial efficiency and produce better long-term business performance. Steve’s innovative, results-driven approach, exacting research and diagnostic process make businesses safer, more productive and profitable by delivering a proven methodology to:
- Identify the risks facing your business
- Develop strategies to mitigate the total cost of risk
- Attain “best in class” status to create intense competition in the insurance marketplace
- Deliver personalized metrics to measure broker performance and ROI, and to achieve improved bottom-line results.
Stephen Paulin, CIC
Risk Strategies and Workers’ Compensation Practice Leader
Orion Risk Management