Top insurance and risk issues to watch in 2024 – part two

From medical inflation to auto verdicts

Top insurance and risk issues to watch in 2024 – part two

Insurance News

By Jen Frost

Liability verdicts, property risk, and climate change are among a host of issues that could have a critical impact for risk managers and insurance stakeholders in 2024.

During a recent Out Front Ideas webinar, Sedgwick global chief brand officer Kimberley George, and Safety National vice president of client engagement Mark Walls shared a roster of 20 issues that North American insurance workers and risk managers need to be paying attention to this year.

Five insurance and risk issues to watch in 2024

Five big issues for insurance industry stakeholders and risk managers to watch in 2024, according to George and Walls, are:

  • Climate change
  • Medical inflation
  • Property risk
  • Liability verdicts
  • Leave and accommodation

Climate change

Climate change was flagged as a “standalone” issue to watch in 2024 by George.

Last year was the hottest year on record, prompting a need for risk managers to focus on heat prevention.

Heat brought wildfires that produced smoke that blanketed the Northeast US.

“Last June, risk managers in New York City and other urban areas in the Northeast faced a risk they probably never prepared for,” George said. “Wildfire smoke from Canadian fires left the city and other areas covered with a thick blanket of smoke and this forced risk managers to evaluate not only their workers’ exposure to poor air quality outdoors, but also indoors.

“I remember sitting next to a risk manager at the airport, and his company was closing a factory in New Jersey because of poor air quality.”

Climate change has also disrupted supply chains, with the Panama Canal having limited the amount of voyages through it due to a prolonged drought.

Medical inflation

It is “just a matter of time” before fee schedule changes start to feed through, with providers pushing for revisions having experienced an increase in labor and material costs, Walls predicted.

“I anticipate we’ll see a lot of them in 2024,” Walls said.

In one example, Illinois’ medical fee schedule automatic inflation adjustment saw the cost for most workers’ compensation medical services in Illinois go up by 8.3% from January 1.

Significant inflation has already been seen across attendant care, long term care, transportation costs, and durable medical equipment.

“A large loss study by NCCI in 2023 highlighted that the costs associated with these services have gone up as much, or greater than, general inflation in the last year,” Walls said. “Attendant care services in particular are costing significantly more due to a shortage of qualified providers, especially in certain areas of the country.

“The reality is, medical inflation is happening in workers’ compensation, and in 2024 expect this to get worse.”

Property risk

Weather-related events mean property risk and insurance continues to be an area to watch.

“The North American property insurance market will start to see more stability and capacity in 2024, and barring major catastrophes, insureds should expect to receive relief after years of price increases,” George said.

Despite market improvements, risk managers are increasingly seeking property resilience assessments looking at climate risk measures and support.

“Understanding the risks then leads to a mitigation plan and the risk manager and their business stakeholders determine what risk mitigation measures are most meaningful to their property resilience approach,” George said. “Keep in mind, risk mitigation through sustainable construction may be costly and not translate to lower property insurance premiums.

“I would like to think it will be a saving in coming years, but today that does not tend to be the case.”

Insurtechs are building tools in the property space, with recent technology such as AI and early detection assisting underwriting and claims efforts in the space.

“Analytically driven property risk quantification provides risk managers the transparency they need to create an optimal strategy for their organization,” George said. “These insights also improve negotiation power when challenging or partnering with insurers around assumptions in securing coverage.”

Liability verdicts

Commercial liability auto verdicts above $10 million have trended up in recent years, and this is likely set to continue, Walls predicted.

“Juries are increasingly hostile toward both big business and public entities and desensitized to the large dollar awards,” he said. “This may not only lead to awards in cases that appear defendable, but also to monetary rewards that go well beyond anything seen before.

“When something bad happens to someone, juries want that person compensated regardless of negligence, and when a baseball player receives a $700 million contract, a jury doesn’t feel a $10 million award is excessive.”

Legal system abuse, including “abuse of advertising” and “litigation tactics to taint jury pools” will continue to pose problems, according to Walls.

Third-party litigation funding, wherein investors with no connection to a case fund legal action, will continue to incentivize lawsuits.

Leave and accommodation

The leave of absence space has continued to evolve, for example in Illinois in which paid leave has been implemented for all workers.

George predicted further movement on paid family and medical leave across US states.

“Some states, like Michigan, New Mexico and Illinois, will try to push through paid family medical leave programs ahead of the elections, while other states work to implement paid family leave insurance policies similar to what we currently see in Florida, Tennessee, Texas and Virginia,” George said. “Leave laws are complex for multi-state employers and require significant administration coordination across the business and communication to implement and manage.

“Be sure and pay attention to regulatory updates around leads as a push for paid leave, regardless of reason, is likely to hit more states.”

Legislation is also moving through Congress and states on drug pricing transparency, potentially mounting challenges to ERISA.

The Mental Health Parity and Addiction Equity Act and EEOC rulings on the Pregnant Workers Fairness Act could also have a significant impact on employers.

What are your picks for the top insurance and risk issues to watch in 2024? Share your perspective in the comments below.

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