2021 Workers’ Compensation Outlook

PMC’s Managing Partner, Andy Shaw, shares his insights in Insurance Business of America Interview

The Workers’ Compensation market is flourishing after many years of unrivaled results. The market has largely been able to withstand the effects of the pandemic-induced economic uncertainty, recording only a 10% drop in net written premiums year-over-year in 2020. In a recent Insurance Business of America interview, PMC EVP & Managing Partner, Andy Shaw, offered expert insights on the 2021 Workers’ Compensation outlook. Here’s the full interview.

Interviewer: How would you describe the current state of the U.S. Workers’ Compensation market?

Andy: The Workers’ Comp market has been stable in the last couple of years, thanks to the robust combined ratios. The market is likely to remain competitive. New programs, insurtech companies, and programs continue to drive competition and add capacity to the market, which in the end puts pressure on Workers’ Comp rates. Other factors that are likely to limit future increase of rates include:

1. Strong overall capitalization of casualty and property insurance
2. Low combined ratios
3. Low claims frequency

Interviewer: What were some of the immediate impacts of the COVID-19 pandemic on the Workers’ Comp industry?

Andy: Outside of the workplace disruptions that drove many companies to shift to remote work and the panic at the start of the pandemic, the Workers’ Comp industry remained competitive. Workers’ Comp carriers focused on adjusting payrolls and offering renewals to accommodate the effects of COVID on businesses.

The COVID pandemic presented and continues to present many unique challenges. For instance, some industries that weren’t regarded as risky before the pandemic were suddenly deemed dangerous for workers. In other industries, workers who were previously non-essential are now considered essential, like workers in mass transit, grocery stores, healthcare, and even insurance agencies.

Some states have also passed presumption rules that place the burden of proof that the coronavirus infection isn’t work-related on the employers and insurance companies. This makes it easier for workers to make successful claims even if they got infected outside work. Another challenge is the administrative changes and executive orders that state policymakers may make regarding compensability rules for COVID-19 and Workers’ Comp coverage.

Interviewer: What are some of the potential longer-term issues to arise out of the pandemic?

Andy: There are still many uncertainties, including

1. How quickly payrolls will recover
2. How workers with long-haul COVID symptoms will fare and the ultimate effect on the cost of claims
3. The shift to remote work
4. The rapid hiring in on-demand industries

Interviewer: How would you like to see the Workers’ Compensation claims evolve in the coming years? What are the pain points that need fixing?

Andy: Greater adoption of telemedicine and telehealth will help provide instant treatment to injured workers. Easy access to medical treatment and personalized care will help workers recover more quickly and, in turn, help reduce medical expenses and claim costs. Some pain points that need to be addressed include clarifying what is to be considered as a Workers’ Comp claim. For instance, the presumptions for COVID are an example of how Workers’ Comp continues to evolve beyond its original intent. Lack of clarity creates confusion on what’s to be compensated or not. Another area is the legalization of marijuana. While some states have legalized recreational and medical marijuana, at the federal level, marijuana remains illegal.

Interviewer: How can insurers make better use of technology to improve their Workers’ Compensation offerings?

Andy: The use of IoT and other online tools can help underwriters improve the underwriting process as well as the pricing of policy coverage terms. Employers should also expand API integration to improve the exchange of data.

Interviewer: How can employers use technology to improve their risk management?

Andy: Technology can help employers improve risk management, record keeping, medical and leave management, safety monitoring, reporting, and training, and ultimately reduce Workers’ Comp costs.

Interviewer: What other emerging risks could impact the Workers’ Compensation space?

Andy: A few emerging risks include the cost and regulatory impacts of COVID, the legalization of marijuana, and the rise of the gig economy.

These are the main takeaways from the recent Insurance Business of America interview with Andy Shaw, PMC Executive Director, on the 2021 Workers’ Compensation outlook. For information about PMC Workers’ Compensation products and solutions visit our website at PMC Insurance Group or contact us at info@pmcinsurance.com.