Workers' comp – claims cost rising, so what can be done?
What’s happening in the workers’ compensation market? In the first edition of the new Workers’ Comp Power Panel, Deborah Fox, AVP of workers’ compensation for NFP Property & Casualty Services, Inc., Jeff Breskin, senior vice president of risk management at J Morey Company, Inc., Jeff Eddinger, executive director of the National Council on Compensation Insurance, and Kevin Combes, director, US casualty claims, global risk consulting and commercial risk solutions at Aon, join forces to assess the biggest wins and losses of the last year. They look at the challenges of COVID, how the new lines between home and work can be regulated and the potential for stricter claims processes.
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Paul: [00:00:24] Hello everybody, and welcome to the latest edition of Insurance Business TV, a power panel edition on workers compensation. Yes, I'm about to introduce you to our newly gathered panel of experts who will be meeting on a regular basis throughout the year to deliver their thoughts on the state of the market and what a market we found ourselves in, one that's reeling from the impact of COVID and remote work, one that may see the workforce stabilize in the year ahead. But rumor has it may see claims costs rise as well. So where does the market stand and how can you make the most of the opportunities it presents? I'm delighted to introduce our panel of experts who will help to guide us through it all. They are Kevin Combes, director US Casualty Claims at AON Global Risk Consulting. Jeff Breskin, the senior vice president of risk management at J. Morey Company. Debbie Fox, assistant vice president of Workers Compensation at NFP Property and Casualty Services. And Jeff Eddinger, who is the executive director of the National Council on Compensation Insurance. So, everybody, let's set the scene. What would you describe as the biggest wins and losses for the workers comp market in the last year? It's a big question. Kevin, I'm going to come to you first.
Kevin: [00:01:50] Well, in terms of wins, I would have to say and I probably have a unique perspective here, but I would say that the proliferation of bespoke and tech solutions that are driving really significant improvements in efficiency throughout the claim process for sure. I mean, if we think about commercial auto as a prime example of how these kinds of mobile applications have have really smoothed out the claim process and really accelerated those types of claim resolutions. I think that's that's a definite win. We're seeing more and more tech. The investment in insurer tech last year was was as big as it's ever been. So I'd say that that's definitely a win because the industry definitely gains from all of this innovation in terms of losses. I would have to I would have to say that the the great resignation, the talent departing the industry right now, I think is is a really significant factor. It's one that is is going to be challenging throughout 2022 to find and retain and develop the kinds of talent that we've seen leave the industry. I think that's going to be a big loss at the end of the day.
Paul: [00:03:07] Thank you. Kevin I think that sort of loss of talent is maybe one that refers to the insurance industry at large at times. But I'm very conscious that we have to. Jeff's on the call with us today. So, Jeff Breskin, for the sake of this, I'm going to refer to you as as Jeff B. Can you give us your thoughts, please?
Jeff B.: [00:03:24] Yeah. From a win standpoint, I think the safety implementation has been the greatest I probably have ever seen in the workers comp industry over the last probably 35 years that I've been in the business. You know, all the the protocols that have been put in place from a safety standpoint and making sure everybody is safe and healthy. So again, on the law side, I truly believe the presumption of correctness is going to continue. The AOC were arising out of in the course of employment and how the whens the whys that these individuals may have contracted the COVID. And that's going to be a challenge for for the carriers as well.
Paul: [00:04:01] Brilliant stuff, Jeff. I love the fact that we've had two different voices and some very, very different answers so far. Debbie, how do you see things?
Debbie: [00:04:09] Yes. I think one of the wins that the industry has seen is the drop in the frequency of claims. And I think everything that the points that Jeff and Kevin have made are definitely right on track with what we're seeing.
Paul: [00:04:25] All right. Thank you, Debbie and Jeff E., if I can come to you now as well. Is claims an issue as far as you see things as well?
Jeff E.: [00:04:34] I would say a win from from a high level perspective has been that the direct costs of COVID claims has not been what some might have feared would have impacted the the system a couple of years ago. And on the flip side of that, just the uncertainty of caused by the indirect impact of COVID, which has been mentioned, the economy, the great resignation and everyone working from home has just kind of added some uncertainty that wasn't there before.
Paul: [00:05:07] Thank you very, very much, Jeff. And you dared to mention the magic word, COVID there. So that brings me quite neatly to my next question, which has been to to just address that the most challenging aspect, if you would, of of of addressing COVID 19 in workers compensation. So how do you see the market developing as well? So. Debbie, I think I'll come to you on this one first.
Debbie: [00:05:32] Sure. I think the vast difference in how the COVID claims are being handled from state to state is quite challenging and critical. Response teams have been created in order to assist the employers through this process.
Paul: [00:05:50] Thank you, Debbie. Kevin, I'll come to you next. I think maybe Debbie touched on the big point there.
Kevin: [00:05:57] Yeah, I certainly agree. But I think if when we're thinking about COVID 19, I think we have to think about the myriad of challenges that it is presented to to us. I mean, if we go back to the March of 2020 and we think about the first major challenge was the transition, the massive pivot that had to occur to people to work from home. Right. That was the first major challenge that we had. It presented huge technical challenges for a lot of large organisations that didn't have the I.T. infrastructure to support all of those people working remotely. So certainly that was one of the first major challenges. And we've seen we've seen all sorts of subsequent challenges. Right. I mean, just in terms of the the long haul COVID claims and who knows how those are actually going to bear out. Some of these cases could be in the tens of millions of dollars when you think about folks going into respiratory failure and having to be on oxygen. And that's sort of really significant and costly care. So there's a there's a lot of challenges and I don't think we're at the end of it.
Paul: [00:07:12] Thank you. Kevin and Jeff E., if I can bring you in, I think that issue surrounding long COVID claims is a big one.
Jeff E.: [00:07:19] Yes. So while the vast majority of the claims are settled fairly quickly and are fairly inexpensive, you do have a small minority of claims that really have turned out to be kind of this new long term disease, if you will, disability, if you will. That could last for four years. And of course, it's only been a couple of years since we don't know how long yet the long COVID thing is going to last. So that that adds to challenges just from the claim process.
Paul: [00:07:47] Thank you, Jeff. And I'll move across to the other Jeff as well. What are your thoughts on this?
Jeff B.: [00:07:52] Yeah, I mean, what we saw, unfortunately, in March of 2020, employers had to lay off. Right. And so as a result, we saw the tick of continuous trauma and post termination claims. And these were folks that file claims filed benefits that ran for 52 weeks. This the frequency of these claims impacted clients, experienced modification rates. As a result, the EDD picked up the benefit even on an A week arising out of in the course of employment type of claim. And then these folks are still entitled to unemployment benefits after the 52 weeks. So these cases are now backlogged in the Worker's Comp Appeals Board and it's really had a hamper on on on a lot of factors in the worker's comp arena. And again, as a broker identifying these, you have to then take this to the renewal and making sure that you do your executive summaries so that the underwriters understand these are no fault of the employer. And you have to try to back these type of claims out when you go into your renewal process.
Paul: [00:08:52] Yeah, it's great advice. And Jeff, if I can stick with you for a minute, because I think one of the aspects that we're all getting used to, of course, is this remote working environment. The lines between home and work are being blurred. Can this new normal be regulated?
Jeff B.: [00:09:09] You know, it's going to be very difficult in my opinions. You know, again, somebody who's working from home, you know, they're working all different types of hours. Sometimes they're packing up their laptop and they're going to a different state or they're going to on vacation, you know, and they're working from there and trying to regulate. That is going to be very difficult. But employers are going to have to really identify which of these employees are working, you know, and their hours. And so that at the end of the day, you don't have the coming and going rules that are applicable to the labor codes. And so really, some folks could be on the clock. 24/7 365.
Paul: [00:09:44] Thank you, Jeff. And Kevin, if I can bring you on this bring you in on this issue as well. Do you think it's something that can be regulated? I mean, is this perhaps something that should be self regulated?
Kevin: [00:09:56] Yeah, I think it's it's going to be tough to regulate it for sure. We've seen so much controversy around vaccine mandates and all of these kinds of things. But I think as as human beings, we have a duty to kind of self regulate. Right. We need to make sure that we're being responsible not only to our employers, but to ourselves. Right. We have to we have to make sure that we're striking that appropriate work life balance. I think that's critically important. When the pandemic first hit, we were all working crazy amounts of hours trying to sort through the chaos and and now after, gosh, nearly two years in virtual lockdown, it is it's challenging. And there's a lot of fatigue related to to the COVID requirements, the mask requirements and the social distancing. So I think that we have to be we have to be our own stewards and we have to make sure that we're responsible and how we contribute to society and and how we interact with our fellow humans.
Paul: [00:11:11] Thank you. Kevin I like that line about being our own stewards. Jeff E. Is that something that you would agree with?
Jeff E.: [00:11:17] Well, I would I would also add that I think it's going to require some more diligence from the employer side. There could be rules about, depending on what state you're working remotely, what worker's compensation rates apply to you, what what state income tax laws apply depending on what state you're working from remotely. So I think that it's going to require some communication between the employer and the employee about where and when you are working remotely.
Paul: [00:11:47] Thank you, Jeff. And Debbie, I want to bring you in on this question as well, because from what I understand, you've actually worked at home for quite a while, so perhaps you have a unique perspective on this.
Debbie: [00:11:58] Yes, I do. I've been in this industry a long time and actually I work for since 2002. So I am well aware of the work comp laws and statutes that are out there. So while a lot of employers are struggling with having employees work remotely, it is not a new phenomenon in the work comp arena. So from a claims handling standpoint, it if an injury happens, it's the same type of investigation as any regular work comp incident would be.
Paul: [00:12:33] Thank you, Debbie. And I'm just going to redirect the conversation a little bit now because there have been some predictions made that there will be a rise in claims during 2022, simply because of the fact that the workforce is stabilizing a little bit after 2021 and 2021, excuse me, 2020 and 2021 and everything that we went through during the COVID 19 pandemic. So is this how you see the market shaping up, Jeff? Do you think there will be. Jeff E., I'll point to you first. Do you think there will be a rise in claims?
Jeff E.: [00:13:04] You know, I would say not necessarily. I don't necessarily agree with the assumption that there will be a rising things I do. I do think that it adds some uncertainty. When you shift whenever you shift the workforce and and as new workers are being hired, you could see that new, inexperienced workers entering the workforce could possibly drive up claiming. But to me, it's more of an uncertainty and I'm not necessarily putting my bets on the claims will increase.
Paul: [00:13:37] Thank you, Jeff. So so Jeff isn't putting his mortgage on it. What about you, Debbie?
Debbie: [00:13:43] Yeah, I too am optimistic. I think that everybody has had a rough almost two years with job insecurity, layoffs, furloughs, reduced work hours. So I think as we get back to our pre-COVID work environments, I think that absolutely I'm optimistic that people are actually going to want to work safer and just do the best they can for their employer. And I think having that PPE equipment also is a good result as of what we've dealt with.
Paul: [00:14:19] Thank you, Debbie. So there seems to be a lot of optimism among the panel. Kevin, are you going to keep that going.
Kevin: [00:14:26] For a little less optimistic? We're not out of the pandemic yet and we're seeing new variations even of the Omicron strain. So I think that I'm hopeful. I would say that we're going to start to see a mitigation of some of the economic headwinds. And as a function of that, I'm hoping the economy continues to grow and is a natural progression of that growth. We would anticipate seeing some more claims, but as a as a function of the economy, I'm hopeful that that we're just going to start getting a little closer to normal. But I'm not I'm not convinced that it's going to drive a significant increase in claims or what have you.
Paul: [00:15:14] Thank you. Kevin So we've had two optimists and one who is hopeful. Jeff B. Where do you stand?
Jeff B.: [00:15:21] Yeah, I still think we're probably another 18 months to two years before we see this market harden. It's still a soft market. Again, loss ratios are down and as employers continue to to hire more talent, the values, the incentive bonuses are going to come into play, the higher salaries are going to come into play. And again, it's going to be really important to to leverage where the price points are going to be for these carriers at the end of the day. So I truly believe that, you know, it's all about positioning yourself, making sure that your clients frequency and severity is down, making sure you get the discretionary credits that are applicable to to a policyholder so it can offset any increase to their X mod. And then really at the end of the day, position yourself for the best results at renewal. Thank you, Jeff. It seems that you don't all necessarily agree that the claims will rise, but if there is that potential, of course, that could see some stricter claims processes be introduced. So I guess when we're looking at this from the broker standpoint, I mean, what preventative measures can be taken and how can brokers and insurers, I suppose as well, actively support the claims process from from stage one? And I think I'll come to Debbie.
Debbie: [00:16:40] Yeah. You have to start by preventing injuries. That's how you make a make change. And so the first thing that employers should do is hire smart, check the references. That's more important now than ever with this short staffing crisis that we have across the country. In addition to that, I think brokers and insurers really need to take the time to explain to their insureds the importance of timely reporting, a workplace incident, because there is statistics out there that clearly show that reserves are tied to how many days they waited to report that claim.
Paul: [00:17:24] Great points, I think, Debbie. Kevin, would you agree?
Kevin: [00:17:28] Absolutely. I think that the diligence around hiring is a is a critical preventative measure that can prevent hiring a bad apple. And and that's a that's something that's entirely within the control of of employee employing organizations. So for sure. And I don't think that we can lose lose sight of the basic blocking and tackling. Right. Making sure that if you've got locations that that that may not have frequency. They may not be reporting claims that often making sure that they understand how to get cases reported. Because one of the best things to prevent an out of control severity problem is getting your cases reported as quickly as you possibly can. So don't hang on to them. Make sure that that if you've got an opportunity to to train up your remote staff and make sure that they're aware of how to get a case reported as quickly as possible, it's time well spent.
Paul: [00:18:31] Thank you. Kevin So it seems that hiring and reporting are the critical issues so far. Jeff B., is that how you see things as well?
Jeff B.: [00:18:42] You know, for for me, I honestly, I believe in processes and programs. Right. And if clients can put the processes and programs in place, I think you have a great chance to win at worker's comp. Right. And safety and frequency and severity. And what I mean by processes and programs, you know, I start out by making sure that you have an MP assessment, medical provider assessment where you work with your centers of the world. The employer goes down, we set up protocols. The job descriptions are critical to any type of worker's comp claim. Having the tasks within the job descriptions are critical to the examiner, to the doctor. Going through the ADA interactive process from a from a employment standpoint that follows in that Bermuda Triangle of workers comp and employment law. Right. Making sure that you have that return to work program usually within 90 days because now you have a diagnosis and prognosis within 90 days. But having that person working at the place of employment versus at home then causes litigation rate even higher. And then the morale and then they with COVID, we all know the COVID 19, I think everybody gained 19 plus pounds, right, whether you were on worker's comp or not. So it's a lot of moving parts. But again, processes and programs is where I focus and I gear with my insurance.
Paul: [00:19:52] Thank you, Jeff. I wish it was only £19, but I think all of you have proven today that you've got the expert knowledge. So I'm now going to ask each of you to leave our audience with a key takeaway or a tip as we look at the workers compensation market in 2022. So, Jeff E., I will come to you first.
Jeff E.: [00:20:14] Yeah, I think the worker's compensation system is strong, very stable. It's shown great resilience and we are well positioned, I think, to handle the challenges that lie ahead with COVID or whatever comes our way in the next one or two years.
Paul: [00:20:31] Okay. Thank you, Jeff. So positive start for sure. Kevin, what's your tip or take away?
Kevin: [00:20:37] Look to your data. Your data, your loss experience will be very directional in terms of where you should focus your efforts in 2022. If you've got a problem with ergonomic claims, reach out. You have lots of resources available through your carrier and claim administrator and your broker. Be sure that that you're paying attention to those key metrics and make adjustments to your program as soon as those numbers start to come out of out of line.
Paul: [00:21:08] Thank you. Kevin. Data is a message that seems to reverberate across the entire insurance industry right now. So it's not a surprise to see that one come up at some point. Jeff B, let's come to you now.
Jeff B.: [00:21:20] Yeah, I think you always got to be aware of where your client's going now and in the future. Right. So looking at the current workers comp program may change 12 months or two years from now. You may have a client who's in a guaranteed cost program that's hovering at 750 to a million and a half to $2 Million in a guaranteed. At some point, you have to you have to be aware when is it time possibly to look at a loss sensitive or having your own captive right. Or a standalone captive and giving that client of yours that cash flow. Right, which is critical today than ever before. So as a broker, you have to look outside the box, because if you don't guess what, somebody else will be there looking at them as well.
Paul: [00:22:01] Some fantastic thoughts there. Debbie, it's always tough for the person who's going last, but leave us with your key takeaway or tip, please.
Debbie: [00:22:11] Sure. 2022 will be a bumpy ride in the court system. With all these COVID cases making their way up through the appellant, courts can have a major impact on our industry. So stay vigilant and keep your clients informed of these new laws as they come down.
Paul: [00:22:30] Yeah, brilliant thoughts there from everybody. Thank you so much to everybody for joining. Really looking forward to seeing the two Jeffs, Debbie and Kevin again next time. Remember to do check out the worker's compensation specialty channel and insurance business America for all of the latest workers comp industry news. And we'll see you next time here on Insurance Business TV.