2020 has been a rollercoaster of a year and workers’ comp executives are looking forward to 2021 and hoping that a COVID-19 vaccine will introduce some stability back into the world.
The pandemic has introduced a variety of new risks into the sector. COVID-19 presumptions have made an infectious disease largely compensable — something the industry hadn’t seen before — and like every industry, workers’ comp has felt the financial effects of the virus acutely.
While some of these risks will decline with the introduction of a vaccine, industry leaders know that many will linger well into 2021.
To better understand what issues are affecting workers’ comp, NCCI conducts an annual survey of workers’ comp insurer executives. This year’s “Focus on 5” surveyed 102 executives and paid special attention to the ways in which the COVID-19 pandemic is affecting the industry.
1) COVID-19’s Effects on the Industry Cannot Be Overlooked
Nearly two-thirds of the survey’s respondents identified a COVID-related issue as their top focus in 2020. The virus touched almost every facet of the industry from worker safety to premium sizes and company financials.
Executives’ concerns range from wondering when the pandemic will end to worrying over the size and volume of claims that could develop. They’re also pondering the effects that long-COVID, a condition that may leave some with chronic illnesses or disabilities, could have on the industry.
With vaccine distribution underway, it may feel like the pandemic is on its way out, but the reality is it will take months to reach herd-immunity and social distancing will continue well into 2021.
This, combined with the fact that the virus could leave some with symptoms long after they should have recovered, means that workers’ comp will likely be hearing about COVID-19 for a long time to come.
2) Maintaining Rate Adequacy Going Forward
Maintaining rate adequacy follows COVID-related issues in executives’ top concerns, with 22% naming it as a priority for 2021.
Rate adequacy is almost always a priority for insurers and insureds, but in recent years soft markets have made it less of a concern in the workers’ comp space.
COVID-19 changed all that, however. Claims are declining on the whole, but COVID-19 could bring expensive, catastrophic claims in some cases.
On top of these problems, insurers don’t yet have a lot of data on COVID-19 claims, which makes pricing risk in workers’ comp a challenge for underwriters.
All of these issues could quickly turn hard a market that was expected to remain soft for years to come.
3) The Changing Workplace
Changes in the ways we work have long been a priority among workers’ comp executives. In last year’s Focus on 5, executives reported the gig economy and the aging workforce both made the list.
This year, all eyes were on remote work, however. Thirteen percent of executives noted it was their top concern. The shift to work-from-home arrangements has long been something those in the workers’ comp industry have been watching.
COVID-19 has only sped up their interest in the issue, especially since some large companies have already announced they’ll be offering permanent remote-work arrangements post-pandemic.
Remote-work ergonomics, the safety of home environments, and determining whether or not injuries are compensable when they occur while an employee is working from home are all things executives are thinking about heading into 2021.
4) COVID-19 Presumptions and Other Regulatory Activity
COVID-19 presumptions and other regulations are issues that are top-of-mind for executives this year. Nine percent reported regulations and politics as their top concern, while five percent named presumptions specifically.
Since the pandemic began, regulations have been shifting rapidly, adding complexity to an already complicated workers’ comp regulatory landscape.
Insurers are concerned that COVID-19 presumptions could make presumptions for other infectious diseases more common, the survey reported.
Over the last few years, presumptions for conditions like PTSD and certain cancers have become increasingly popular, causing insurers to speculate that they may gain traction for infectious diseases as well. Previously, infectious diseases were unlikely to be covered under workers’ comp policies.
5) Economic Downturns
Prior to the pandemic, the economy was booming. Now, business closures, stay-at-home orders and a faltering stock market signal that a recession is ahead, if not already occurring.
Workers’ comp policyholders have been forced out of business and executives are worried about how reductions in insured payroll could affect their premiums.
Businesses furloughing or laying off staff leave fewer people paying into the workers’ comp system and therefore insurers are left without much-needed premium dollars.
They may need to reduce frontline staff and look for other places to cut back if 2021 doesn’t bring swift economic recovery. &
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