The US workers’ compensation market has benefited from a period of low combined ratios, but challenges loom that could affect its profitability.
A recent report by Conning identifies two primary risks: an aging workforce and diminishing returns from risk mitigation strategies. These factors, combined with reliance on reserve releases, suggest that profitability concerns may already be materializing.
Read more: US insurance sector to lose around 400,000 workers by 2026
Some insurers have turned to reserves to sustain favorable combined ratios, a practice that could deplete reserve levels over time. This raises a critical question for the industry: how can workers’ compensation firms effectively reduce claim frequency and preserve their financial reserves?
One potential solution highlighted in the report involves wearable technology. These devices monitor workers' physical conditions and movements while detecting environmental hazards.
According to Jay Sarzen, director of insurance research at Conning, such technology can play a key role in guiding workers away from situations that could result in severe injuries and costly claims.
"Wearable technology can guide workers away from dangerous situations or from engaging in activities that could result in a severe injury and an expensive workers' compensation claim," said Sarzen.
The report, titled Wearable Technology’s Slow Acceleration to ‘Preserve the Reserve’, examines the functionality of various wearable devices and assesses their potential impact on workers’ compensation practices.
It is based on a survey of 60 senior workers’ compensation insurance executives. The survey explores current attitudes toward wearables, including their efficacy and return on investment, as well as measures taken to encourage adoption among policyholders. It also outlines challenges to broader implementation.
The study notes that while wearable technology holds promise, adoption has been gradual. Factors such as cost, data privacy concerns, and uncertainty around long-term benefits remain significant barriers. However, the potential for these devices to reduce injury frequency and support reserve preservation could make them a valuable tool in the workers’ compensation industry.
What do you think about wearable technology’s role in shaping the future of workers’ compensation? Share your thoughts in the comments.
