The state of the workers’ comp marketplace heading into 2022

The workers’ compensation market has remained strong and resilient throughout the COVID-19 pandemic, riding on the tailwinds of several years of unparalleled positive results. Despite the global health and economic crisis causing considerable challenges for businesses of all sizes and sectors, workers’ compensation insurers generally managed to pivot their operations, stay healthy, and maintain profitability.

“The market is stable right now, and prices are fairly moderate,” said Matt Zender (pictured), senior vice president, workers’ compensation strategy at AmTrust Financial Services. There are some examples of certain industry segments where a risk might see a small rate increase at renewal, but those are the exception. For the most part, if a risk has performed well or is in an industry segment that’s been relatively benign from a COVID perspective, they’re seeing year-over-year flat rates or rate decreases right now. Good business is still seeing a reasonable renewal offer.”

At the height of the pandemic-related lockdowns and widespread work-from-home orders, there were some concerns that there would be disruption or delays in workers’ compensation claims adjudication and settlement. Certainly, there was a backlog in the US court system, so any serious workers’ compensation claims that triggered legal proceedings or appeals were of particular concern.

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But claims data appears to show that claims worked their way through the system at around the same pace as they did before the pandemic, according to Zender, which helped to maintain market stability. In fact, the ability for adjusters to deal with certain less-complex claims actually sped up, the AmTrust SVP added, while other aspects of the business slowed. Overall, the industry has managed to maintain claim closure rates throughout COVID that are on par with the pre-pandemic norm.

“For a while when COVID first hit, the industry saw a dramatic reduction in claims,” Zender told Insurance Business. “From March 2020 until the time that states started introducing COVID-19 presumption laws, there was a period where the level of claims coming in was much lower because people either weren’t working at all or they were working remotely.

“A workers’ compensation claims adjuster typically works a desk, and they may have 100+ claims that they’re working on at any one time, and their ability to get to certain things is often predicated on the number of claims that are coming into them. In the early days of the pandemic, they didn’t have as many claims coming into them, so they were able to clean up and resolve outstanding items.”

Then the presumptions laws came in, and many states extended workers’ compensation coverage to include COVID-19 as a covered disease for certain workers. In most states, the presumptions only extend to healthcare workers and first responders, but some took executive action to provide coverage to other essential workers like grocery store employees. In response, the workers’ compensation system had to figure out a new COVID claim settlement process and new operational process, Zender explained.

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“Most of the COVID claims did not involve permanency, so those claims in and of themselves didn’t need to get in front of an appeals board,” he added. “Overall, COVID hasn’t slowed things down. If you look at the claim closure rates, they stayed strong. Our closure rates at AmTrust got better through COVID because we adjusted our operations to allow for the system to continue to work, albeit differently.”

In addition to concerns around the industry’s ability to handle claims during the pandemic, there was also uncertainty around how the economic impacts of the pandemic would affect claim costs. The US, like many economies around the world, is experiencing inflation in part due to the fiscal and monetary support that the federal government has deployed over the last 18 months to help people through the economic disruption of COVID-19. 

“Inflation, in general, is something that we certainly pay attention to as an industry,” said Zender. “It is something that carriers always look at to determine whether their reserves are adequate on a portfolio basis. For workers’ compensation, medical inflation and claim severity is something that we look at every year. CPI, medical inflation and other things along those lines are all items that are well institutionalized into the rate-making process. The metrics that I’ve seen so far seem to indicate that the medical inflation is not alarming. The figures that we’ve seen indicate that medical inflation is present, but within a range that the industry would be able to digest.”

Business owners are also concerned about inflationary pressures, especially if medical inflation – something they don’t always have a direct ability to see – means their insurance costs go up. And while they’re contending with that uncertainty, they’re also battling other challenges like supply chain disruptions and the widespread labor shortage. As Zender put it, they’re up against “a three-headed monster.”

“I think right now, of all the things business owners are worried about, their insurance spend would probably be low on the list,” he commented. “Based on what I’m seeing, workers’ compensation insurance spend looks like it’s going to be fairly moderate in the near future. We’re certainly not in a hard market for workers’ compensation right now, and I don’t see a hard market upon us right away. A good risk should expect to see a reasonable renewal for 2022.”

Matt Zender is Senior Vice President, Workers’ Compensation Strategy at AmTrust Financial Services, Inc., with more than 25 years in workers’ compensation insurance. AmTrust, a leader in insurance solutions for small commercial business and specialty risk, seeks to deliver superior services at a rate that’s both fair and affordable. We work closely with our appointed agents and the small and mid-sized businesses they serve to design the specific packages they need to comply and succeed.

Zubair Q Britania

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