“We have seen a long-term trend in workers’ compensation that is continuously improving. Frequencies have been declining for many, many years now, while employer safety has steadily improved. But then we were hit with this very dramatic shock, something that impacts the workplace and the way people work,” Pulkstenis told Insurance Business.
EMC Insurance, a Des Moines, Iowa-based property and casualty insurer, has over 110 years of experience in workers’ compensation insurance. But the pandemic has brought unprecedented changes to the work landscape.
How has the pandemic affected workers’ compensation?
A silver lining is that remote work has led to a reduction in workers’ compensation claims. “We’ve seen fewer slips and falls in the workplace, and fewer drivers on the road potentially mean fewer driver accidents,” said Erin Stober (pictured below), vice president Risk Underwriting Assistant at EMC Insurance.
However, industries like aviation, transportation, retail, and manufacturing that could not easily adopt remote working are still highly prone to workers’ compensation and other claims. Longer working hours in some of these industries due to high demand also put workers at risk of overwork.
The Great Quit, a well-documented spike in workers resigning from their jobs amid the pandemic, has also prompted greater hiring efforts within organizations. New hires present significant exposure for companies, as these workers must quickly learn to navigate unfamiliar environments without sufficient safety training.
“I don’t think things are completely settled yet. [after the pandemic]. We are not quite stable. I think employers are still trying to figure out where this is all leading,” Pulkstenis said.
Inflation also adds to the “uncertain environment” of workers’ compensation. Salaries and medical costs rise with the cost of goods, driving up rates.
“Premiums are increasing due to different dynamics despite more people staying home and decreasing injury frequency. Wages are rising and the risk profile has changed. We also expect medical costs to rise, just as other costs rise. There is a compensating effect with these two factors.
What is the forecast for workers’ compensation in 2023?
Despite the complex dynamics in the workers’ compensation space, EMC Insurance believes the market will remain strong in 2023. It also remains one of the most profitable segments of the U.S. property and casualty insurance industry.
Last year marked the eighth consecutive year of profitable underwriting for the workers’ compensation industry. Data from the National Council for Indemnity Insurance (NCCI) showed the combined ratio for private carriers was 87% in 2021, the same ratio as in 2020 and only slightly higher than in 2019.
“We certainly see the workers’ compensation system doing very well, and we expect that trend to continue despite these other market pressures,” Stober said. “We continue to work hard with our policyholders and agency partners to reduce potential workers’ compensation claims through services to help establish safe workplaces.”
“The workers’ compensation market was healthy at the start of the pandemic, and we still believe the workers’ compensation market will be healthy going forward,” Pulkstenis agreed.
One way agents and brokers can help their clients manage rate increases in workers’ compensation is to encourage them to improve their risk management. EMC Insurance provides various services and resources to organizations to reduce claims.
“Our mission is to improve the lives of workers, and worker compensation is at the heart of that. We work through our Independent Agents to impact the lives of employers and employees,” Pulkstenis told Insurance Business.
For Stober, EMC Insurance is less focused on market uncertainties. “The opportunities in the workers’ compensation market, and the services and solutions that EMC brings to the conversation, cannot be overstated,” she said.
What do you think of the state of the workers’ compensation market? Share them in the comments below.
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