After performing well over the past six years, the workers comp market is starting to feel the impact of COVID-19. Presenting options for clients in this market is critical in dealing with the long-term impact.
Nine months into the global pandemic it remains critical for agents and carriers to assist clients in determining the impact of the virus and how it relates to their employees. While the workers compensation market has performed well over the past six years, it is apparent that COVID-19 will negatively impact this performance for years to come.
“The combination of underwriting discipline, moderating severity, declining frequency and adequate reserves has resulted in six straight years of combined ratios under 100%," says Cristine Pike, manager of communications, NCCI. As 2020 comes to a close, “there is considerable uncertainty surrounding the course of COVID-19 and a lack of data to determine a credible estimate of future losses."
While the coronavirus has reduced risks in some areas, it has changed the risks in others. A slowing economy and accelerated industry changes, particularly in the use of technologies, are likely to have a long-term impact on claims patterns and loss trends. Every state is dealing with COVID-19's risks and consequences and the workers comp industry is starting to feel the impact.
“Individual states have reacted differently regarding coverage for COVID-19 claims," says Matthew J. Ford, vice president, field marketing & underwriting, Amerisure. “Coverage has become presumptive in some states, while not so in others, which has changed the desire to write coverage in those presumptive states."
It remains to be seen which states will allow COVID-19 claims to be captured and included in the claims experience. “Right now, states are allowing it but there's been discussion that they may exclude some of those COVID-19-related claims," says Jim Mitchell, regional vice president, workers compensation and accident & health, RT Specialty. “In a state like California, as part of their one filing, they actually are recommending that they be allowed to add an additional rate component to specific industries such as first responder and essential worker categories."
While the healthcare industry is being hit particularly hard by the pandemic in terms of front-line responders, the workers comp segment did have a little reprieve earlier in the year, primarily because of the availability of telemedicine. “With workers not being able to get to the doctor, or not being comfortable going to the doctor for workplace injuries, costs were lower due to the use of telemedicine," Mitchell says. Additionally, “people weren't getting medical work done following a workplace injury, so those claims are way down as people haven't been doing voluntary surgeries."
The gig economy—where temporary positions are common and organizations hire independent workers for short-term commitment— is another area that agents need to be aware of and present options to their clients. “We've been fortunate to find some really progressive thinkers that are willing to consider writing a fully part-time workforce," Mitchell says. “These are things on the gig side that are creating a different norm that workers comp carriers and agents are having to deal with."
Many carriers, including Travelers, are providing options such as “reductions in payroll for 'paid but not working' employees, changed job classes if duties and operations changed, executed virtual premium audits, extended the premium audit response time requirements and suspended audit non-compliance charges," says Mary Woods, senior vice president and chief underwriting officer, Travelers. “Allowing customers to make mid-term payroll changes to reflect their current payrolls and adjusting their premiums accordingly in real-time," is another area that is being offered, Woods says.
Risk management including pre- and post-COVID loss control programs are critical for an agent to offer clients to help when it comes to pricing. “Understanding the risk appetite of your insured is critical," Mitchell adds. “Spending the time educating clients and prospective clients on the advantages and disadvantages of a loss-sensitive program may prove to be helpful as they look for ways to cut costs and share risk with the insurance carrier."
Olivia Overman is IA content editor.
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