For a record 16 straight months, the number of open jobs has been higher than the number of people looking for work, according to the U.S. Department of Labor (DOL).

The situation is unprecedented in the two decades since the DOL started tracking job turnover in the U.S. In November 2018, the Bureau of Labor Statistics reported 2.26 open jobs for every unemployed worker in the education and health services industry; 1.9 for every unemployed worker in professional services; 1.78 for every unemployed worker in financial activities; and 1.63 for every unemployed worker in mining and logging.

And despite several years of ample capacity and rate decreases in the workers compensation insurance market, the persistent labor shortage could present serious challenges in the near future.

“As long as the employment market remains tight, particularly for highly skilled people, employers are having to make all sorts of compromises. And there’s a danger in that,” admits Kevin Ring, lead workers compensation analyst at the Institute of WorkComp Professionals. “That’s something that could potentially put the brakes on the progress we’re seeing in workers comp.”

Why? During times of high employment, “as the underemployed or the long-term unemployed continue to get pulled back into the workforce, you start to have more and more people with limited experience performing jobs,” Ring explains. “Historically, we know people get hurt more often in the first 30-60 days they work, and people who aren’t skilled get hurt more often than those who are.”

“You have potentially a lower-quality or poorly trained workforce at a time when people are having to work longer hours and longer in their lives, and maybe they don’t have the same physical abilities they once did,” agrees Michael Bourque, president & CEO of The MEMIC Group. “But the market’s demanding and willing to pay them to do the work. All of that makes its way into workers comp loss.”

Currently, Ring hears from many agents that they’re “having a hard time getting employers excited about workers comp” because business is booming and premiums are either holding steady or even declining. “Employers don’t want to talk about what might be going wrong, because if your bill is going down, it doesn’t seem like a problem—even if that bill could be lower,” he explains.

But in light of the labor shortage, where agents need to steer the workers comp conversation “is using the workers comp process to keep employees at work,” Ring suggests. “In a world where so many businesses are struggling to keep all the seats filled, the cost of having someone out is as great as it’s ever been.”

If an employee gets injured on the job and the employer doesn’t have a program in place to bring them back the moment a doctor says they’re capable of performing their duties, “you’re running the risk that that employee may never return to you,” Ring points out. “Every day someone is away from work, it’s less likely they’re ever coming back, and what is the cost of that?”

What creates a great workers comp process is, in a lot of ways, the same thing that creates a great employer/employee culture, Ring says: “As an agent, you need to help employers understand it’s not just about the check they’re writing the insurance company today—it’s about protecting their workforce, because that workforce is what is enabling them to continue to grow their business in this unprecedented era of economic expansion.”

Be prepared to explain, too, that “just because we’ve seen rate decrease after rate decrease doesn’t mean that’s going to always happen,” Bourque cautions. “We all know the market moves”—an especially important reminder in the midst of an ongoing low investment income environment.

“Interest rates are not helping insurers get back to anything close to what they had 10-12 years ago in terms of investment income,” Bourque explains. “Making an underwriting profit is going to continue to be important, and there just won’t be the same opportunities to make it up on the investment income side.”

Considering, too, that the workers comp tail has only gotten longer over time, Bourque predicts that workers comp insurers could start rounding the corner toward a harder market within the next couple of years. “There was simply never enough margin to go double-digit decrease over double-digit decrease over double-digit decrease,” he says. “The double-digit rate decreases we’ve seen are just not likely to maintain themselves. The insurance cycle has not been repealed.”

Jacquelyn Connelly is former IA senior editor.