workers' comp profitability

Is Workers’ Comp Profitability Shifting?

The workers’ compensation insurance sector has faced significant challenges over the past two years. The coronavirus pandemic, coupled with economic uncertainty, has influenced the growth and development of the sector. While claims frequency has been lower than anticipated and profitability has been strong, shifts in the market in 2021 and beyond have industry analysts concerned about future profits even as economic recovery is well underway in the United States.

A Banner Year in the Pandemic

As the coronavirus pandemic descended upon American businesses in the early part of 2020, insurance industry analysts foresaw a grim outlook of high claims and expensive losses related to workers’ compensation insurance. Although claims experienced an early uptick due to worker infections from COVID-19, quarantine orders and business lockdowns both combined forces to slow the claims frequency. In fact, the workers’ compensation insurance market experienced strong profitability throughout most of 2020 because lower claims greatly outpaced pandemic-related losses, according to a study compiled by Fitch Ratings

Strong profits in 2020 built on an already strong workers’ comp insurance market. According to Fitch, this segment of the commercial insurance market has been the most consistent since 2015, owing to strong loss reserves and earned premium. 

Changes in 2021?

Underwriting performance may influence significant shifts in profitability in 2021 for the workers’ compensation insurance sector. Claims activity began to normalize as businesses reopened and stay-at-home orders were relaxed. The rollout of vaccines designed to fight COVID-19 also saw many people finally able to return to the workplace. Fewer workers and more stringent workplace safety standards during the pandemic served to keep claims to a minimum; as workers return and standards relax, common workplace risk exposures are driving up claims. 

Other factors may contribute to declining profits. Fitch analysts suggest that increased business activity is only one driving factor; others include:

  • Competitive pricing within the workers’ comp sector.
  • Falling premium revenue.
  • Reductions in underwriting exposure. 

Unlike many other insurance sectors, workers’ compensation insurance has not pushed higher premium rates. In fact, it is the only major commercial insurance sector to have not increased premiums significantly, and in some cases direct written premiums have dropped by 9% when compared to 2020 figures. 

One issue that bears monitoring is the health care implications for workers exposed to or infected by the coronavirus. In certain cases, workers sickened on the job have experienced severe illnesses; chronic conditions and damage to major internal organs from these virus cases may result in higher claims severity as well as catastrophic claims or ongoing long-term care expenses for the employers of infected workers. 

Volume declines, flat premium activity, and ongoing economic hardships in the business sector continue to put strains on the workers’ compensation insurance sector. Analysts hope that a resurgent economy will help to minimize slides in profitability. For new, workers’ comp insurers will have to monitor the markets closely to detect emerging trends. 

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

workers' comp myths

Workers’ Comp Myths: Fact vs. Fiction

Required by most states, workers’ compensation insurance serves to provide financial support for employees injured on the job. Workers’ comp is a valuable benefit for both employees and employers, yet many myths and confusion surround the insurance. To get the most from workers’ compensation insurance, this guide will present facts to dispel the pervasive myths associated with the insurance coverage.

Workers’ Compensation Insurance: A Brief Overview

Across the United States, workers are protected with an important employee benefit called workers’ compensation insurance – better known as “workers’ comp.” The purpose of this specialized form of insurance is to provide financial compensation for injuries occurring in the course or scope of employment. Becoming injured on the job can result in lost wages and medical expenses; workers’ comp is designed to help injured workers face these financial challenges and return to the workplace as quickly as possible. 

Some form of workers’ comp is required for nearly every employer and in nearly every state. The primary benefit for employers is that workers’ compensation insurance generally makes the employer immune from a range of liabilities associated with workplace injuries. 

Myth #1: Injuries 

Many workers believe they have to be injured while doing their jobs in order to be covered by workers’ compensation insurance. This is not accurate; workers must only suffer an injury in the course or scope of their employment, which can include both job-related and non-job-related tasks. Many workers are injured in the workplace, but not directly as a result of their actual work activities. These workers are still eligible for benefits under most policies. 

Myth #2: Where Injuries Occur

Almost as common as the first myth above is the misconception that workers have to be injured on a jobsite to qualify for benefits. The truth is that injuries can occur outside the workplace, such as during travel between jobsites or an injury happening at a remote location. As long as the worker was injured in the course or scope of their employment duties, they are eligible for benefits. 

Myth #3: Employer Assistance

A pervasive myth surrounding workers’ compensation insurance is that employers have an obligation to help injured workers maximize their benefits under the plan. The fact is that employers have very little to do with workers’ comp claims processing after the initial injury report is filed; the employer’s insurance company typically pays the benefits. In general, unless an injury claim is disputed by the employer, it is up to the injured worker to seek maximum benefits – employers simply do not play a major role in the process.

Myth #4: Qualifying Injuries

Workers often fear that their workplace-related injury will not be covered under their employer’s workers’ compensation benefits plan. This fear often leads workers not to file claims, instead using other healthcare insurance coverages to pay for medical expenses. Under most state workers’ comp guidelines, however, any injury that occurs at work will qualify for a claim, no matter how minor. If injured on the job, the injured employee can and should file a claim.

Myth #5: Retaliation

If you are a worker injured on the job and file a workers’ compensation insurance claim, can your employer fire you? Unfortunately, this is a common myth, leading many workers to avoid filing claims even for severe workplace-related injuries. The fear of employer retaliation looms large; thankfully, a myriad of local, state, and federal laws prevent employers from engaging in retaliation for a workplace injury claim. Injured workers have specific rights and are allowed to seek compensation for their workplace injuries. 

Workers’ Compensation Insurance Facts for Employers

Workers’ compensation insurance greatly reduces an employer’s risk exposures regarding employee injuries. The concept of workers’ comp began over a century ago as a cooperative agreement between employer and employee: the employer provides financial compensation for workplace injuries in exchange for the employee not filing a legal claim against the company. This holds true even today, protecting employers from the expense and hassle associated with employee lawsuits. 

Another important benefit for employers who maintain such coverage can avoid other penalizing issues, including regulatory fines and prison time for failing to provide this benefit to their workers. Workers’ comp provides concrete benefits for all parties, helping injured workers recover and get back to work as fast as possible and allowing employers to better manage their workplace risks. 

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

workers' compensation

How Has COVID Reshaped Workers’ Compensation?

The coronavirus pandemic of 2020 continues to create outsized impacts on the business world. Companies of every size and type have been affected, and millions of people have lost their jobs. Still, the economy has kept going, with companies balancing employee safety with the necessity of remaining open for business. Essential workers, such as those in retail, food service, healthcare, and first response, face increased risks of contracting COVID-19. Workers’ compensation insurance policies may be utilized to provide financial relief for those affected by the disease. How has COVID-19 affected workers’ compensation, and what can companies do to mitigate their risks?

Dire Predictions Unrealized

Insurance experts from around the world began predicting a hardening of the workers’ compensation market in the wake of COVID-19. The expectation was that essential workers would overwhelm these policies with claims as they became infected in the workplace.

The National Council on Compensation Insurance (NCCI) analyzed potential impacts of COVID-19 claims on employers by running several scenarios. The financial picture revealed by the analysis is alarming, with loss rates in excess of three times current rates and an estimated $81 billion in losses if the worst-case scenario in the study is realized. In another scenario run by the NCCI, five percent the first responders and healthcare personnel who were eligible for workers’ compensation benefits became ill from COVID-19. In this scenario, if only 60% of the resulting claims were paid, employers could expect cost increases of $2 billion.

Thankfully, these grim scenarios have not manifested themselves. Although an increase in COVID-related claims was experienced, they were greatly outpaced by a significant decline of claims arising from a wide range of occupational injuries and illnesses. As a result, the workers’ comp market remains healthy and competitive.

Uncertainties Remain in the Workers’ Compensation Market

For years, the workers’ compensation market has experienced substantial growth. That growth trend shifted in late 2019 and into the early part of 2020. The market began to harden amidst this shift, attributed to factors including low interest rates, market surpluses, and an increase in both the severity and frequency of workers’ comp claims.

Premium volumes have decreased by as much as 20% in 2020, and industry analysts expect a lag of one to two years before the market resumes growth. Uncertainties remain in the market, however, as states implement regulations regarding the compensability or eligibility of workers to claim workplace infections from COVID-19. Insurance analysts also warn against an increase in fraudulent claims and recommend that every COVID-19 infection claim is thoroughly vetted.

Minimizing COVID-19 Claims Experiences

What can employers do to manage workers’ compensation claims arising from COVID-19? There are several risk management solutions. First, employers must carefully review their existing workers’ comp coverage to gain an understanding of what is and is not covered. If coverage gaps are revealed during review, alternative insurance plans like unemployment insurance or temporary disability insurance may be available.

Next, protecting employees in the workplace remains the most effective means of curtailing COVID claims. Employees should be provided personal protective equipment such as gloves and masks, especially if they work in frequent/close contact with customers. Social distancing recommendations from the Centers for Disease Control and Prevention (CDC) should also be followed. If possible, minimizing building capacities and avoiding group gatherings in the workplace should be implemented. Employees should be given training on hand hygiene and infection control practices in the workplace.

Finally, information on benefits outside of workers’ compensation insurance may be available for those affected by the coronavirus. The CARES (Coronavirus Aid, Relief, and Economic Security) Act and the Families First Coronavirus Response Act can provide financial support for employees sickened in the workplace.

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

Workers compensation market

Workers’ Compensation Market Predictions 2021

Last winter, the world was plunged into a period of deep uncertainty, unpredictability, and instability as the novel coronavirus spread rapidly across the globe. By spring, widespread lockdowns forced businesses to modify operations or shutter their doors. Workers lost jobs in numbers not seen since the Great Depression, with April’s peak reaching 14.7%. As restrictions lifted in many areas, workers began returning to jobs, reducing the unemployment rate to 6.7% in November.

While there are many industries that have been able to make the switch to remote work, a large percentage of the workforce is still required to report to on-site jobs. With the onset of cold weather and the holidays, the pandemic is seeing a second surge that is impacting every corner of the country. This leaves a significant number of people at increased risk for contracting COVID-19, including while on the job.

This, along with other factors, has the potential to impact employers and the workers’ compensation market into 2021.

Predictions for 2021

The impacts of coronavirus on workers’ compensation are varied, as coverage eligibility depends on industry risk variables and state guidelines. Each state has its own rules in place for workers’ compensation insurance, so the stipulations that relate to the pandemic could be significantly different from one state to the next. Regardless, the coronavirus will have a significant impact on the 2021 landscape.

Claims Predictions

Normally, workers’ compensation does not cover contagious diseases, but it may or may not cover employees who contract COVID-19. Employees whose jobs place them at greater risk than the general public can typically make a successful case for filing for workers’ compensation. There has already been a rise in claims filed due to the coronavirus, which has led to significant losses for some providers. The winter surge is just getting underway, and, thus far, widespread lockdowns have not been ordered. As such, it is quite likely that claims will continue to increase, potentially dramatically, in the first quarter of 2021 and then start lowering as more individuals become vaccinated.

Pricing Predictions

Prior to the pandemic, rates had been on a downward trend. There is some indication that employers should expect that trend to reverse in the coming year. However, the reversal is not necessarily strictly due to virus impacts. The market was already showing signs of change before the pandemic. Other factors contributing to losses need to be considered, as those causes are not likely to change once the health crisis has passed.

Solvency Predictions

One factor that could significantly impact workers’ compensation markets is the state of their investments. COVID-19 has led to a particularly volatile stock market, which has had a negative impact on investment incomes. The markets may not stabilize until well into 2021. As such, insurers may find that they have to make adjustments to their portfolios to mitigate damages caused by plunging stocks.

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

Workers Comp

COVID-19 and the Reshaping of the Workers Comp Industry

Workers’ compensation insurance, more commonly known as “workers comp”, is a primary benefit for many American workers. In the wake of the COVID-19 pandemic, this financial relief insurance has been called upon time and again for workers affected by the virus. The business sector has seen profound changes in recent months; COVID-19 and workers comp and the relationship between the two is poised for dramatic reshaping. Much of the initial response was due to fear of the unknown, but even this is driving change within the workers’ comp space.

Survey Reveals COVID-19 and Workers’ Comp Shifts

In late June, 2020, Health Strategy Associates completed its second survey on the relationship between COVID-19 and workers’ comp insurance. The survey, entitled “The Impact of COVID-19 and Employment Changes on Workers’ Compensation: A Follow-Up Survey of Payers and Service Providers”, illustrated sweeping changes within the sector. Among the results were:

  • COVID-19 related claims were relatively inexpensive; about 96% of all reported workers’ comp claims were estimated to cost $3500 or less.
  • New injury claims dropped by a range of 25-50% between the months of March and May, 2020.
  • Total claims are expected to decrease by about 20% for 2020.
  • Survey respondents indicated that less than 4% of COVID-19 claims accounted for most of the coronavirus-related costs.

In simple terms, much of the early concern regarding claims based on COVID-19 infections turned out to be not as impactful as feared. Rather, the changes in the workers’ comp landscape come from economic downturns, mass unemployment, and restrictive quarantine/stay-at-home orders. Payers are anticipating reductions in premium payments, driven in part by severe declines in payroll and outright closure of businesses.

Presumptive Benefits: A Minimal Effect

Another early concern for insurance firms and payers was the looming specter of presumption, or state laws that presume an illness or injury was work-related, making the affected employee eligible for workers’ comp benefits. Numerous states passed legislation pertaining to coverage of COVID-19 related workers’ comp claims, fearing that employees would become exposed to the virus on the job and be unable to receive financial compensation for medical expenses and lost wages. Not all employees were covered under presumption laws; typically, only first responders and front-line healthcare workers were protected by the new legislation.

Workers’ comp industry analysts note that presumption laws are not likely to have a major effect on insurance costs going forward. In the Health Strategy Associates survey, many of the reported claims examined were filed after a worker tested positive for the coronavirus, but remained asymptomatic. Only a small percentage of infected workers’ claims resulted in high expenses; the average cost per claim was close to $8000.

Looking to the Future of COVID-19 and Workers’ Comp

Owing to the above factors like high unemployment rates and business shuttering, insurers and insurance industry analysts suggest premiums will continue to drop well into 2021. Payers are alarmed, seeing fewer dollars now and expecting slower economic recoveries than originally predicted. Ultimately, the workers’ comp industry may have to tighten; among the possible effects of reduced premiums are:

  • Reductions in insurance workforces, including adjusters and claims processing professionals.
  • Closure of insurance firms or dramatic cuts in services.
  • Industry-wide scrambling to find alternative revenue-generating options.

COVID-19’s effects have touched every part of the U.S. economy. As the pandemic continues its stranglehold, businesses across sectors have had to innovate. The workers’ compensation industry is no exception. Changes in the way claims are handled are only part of the picture; insurers may have to seek new ways of making ends meet and to adapt to changing conditions in order to continue business operations.

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

COVID-19 Workers Comp Considerations

What Employers Should Consider Regarding COVID-19 and Workers Comp

The coronavirus pandemic gripping the globe has had profound effects on businesses of every size and type. Millions of people have been laid off in the wake of economic turmoil. Still, many employees of companies have been forced to balance work with safety considerations, potentially leading to serious risks regarding their personal health. Workers in establishments deemed “essential,” including retail, healthcare, and foodservice operations, are at higher risk of contracting COVID-19 in the workplace; in these cases, workers’ compensation insurance may be called upon to provide financial relief for affected workers. In this guide, insurance agents can learn what their clients should consider following the economic devastation of COVID-19 and the effects it has had on workers’ comp claims.

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Workers' Comp 2020

Important Workers’ Compensation Coverage Considerations for 2020

Workers’ compensation insurance and other forms of occupational insurance are part of the business landscape for thousands of employers. Typically required by state regulations, these valuable insurance options provide protection for both employees and the companies they work for. At their best, occupational insurance plans like workers’ comp provide financial support in case of workplace-related injury or illness, helping to cover the medical expenses and lost wages of employees injured on the job. As with any government regulations, changes for 2020 may affect workers’ comp and related workplace safety programs. Here is a look at the trends and changes business owners need to know as we enter into the new year.

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Sleep Deprivation

How Sleep Impacts Workers’ Compensation Claims

It should come as no surprise to learn that America’s workforce is fatigued. Long hours on the job and the demands of family life have created a situation where workers have become overtired. Tired workers are more likely to make mistakes on the job, and these mistakes can result in injury. Chronic lack of sleep has also been pinpointed as a cause for numerous health concerns. In all, the lack of sleep among America’s workers has led to a rise in workers’ compensation claims. Occupational insurance plans like workers’ comp provide benefits for those employees injured at work, but it is imperative for business owners and managers to understand the relationship between poor sleep habits and an increase in injury claims.

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Workers Compensation

Workers’ Compensation and Long-Term Occupational Illnesses and Injuries

Workers’ compensation and other forms of occupational insurance provide financial support for employees injured in the course and scope of their duties. Nearly every state requires employers to carry some form of this valuable insurance, which is designed to cover the costs associated with lost wages, medical expenses, and in some cases, long-term disability. Each occupational insurance policy is different, however, and both employers and employees must better understand the potential limitations of coverage for injuries and illnesses resulting in the need for long-term care.

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