A new survey finds ratings data, changes in the workplace and workforce, medical inflation, and economic uncertainty are top-of-mind concerns for workers compensation insurance executives.
The National Council on Compensation Insurance (NCCI) released the results of its annual survey listing the concerns of insurance executives in the workers compensation (WC) industry.
In the most recent survey, executives were concerned with the decline in rates and loss costs.
The data and analysis currently used is being questioned as executives wonder if it is sufficient to “evaluate potential risks to the long-term financial health of the system.”
NCCI expects a 2023 combined ratio under 100, marking the 10th consecutive year of underwriting profitability.
Claims frequency has steadily decreased for two decades, the NCCI said, noting a temporary rise during COVID-19.
Medical severity has remained moderate.
Drilling down further, workers compensation medical severity has grown at 1 percent annually since 2019, according to the NCCI.
“Price pressure on medical WC claims costs has been slow to rise,” the workers compensation council noted, adding that “strong employment and wages, declining loss frequency relative to premium, and moderate changes in claim severity all contribute to a continuation of declining loss costs.”
Medical costs are rising, causing uncertainty for carriers who are concerned about frequency, severity and large claims.
Personal healthcare data projections from the Centers for Medicare & Medicaid Services (CMS) indicates a range of 2.5-3.5 percent range annually between 2024-2031.
NCCI points to “other factors in the mix offsetting overall increases in medical claim costs.”
Medical conditions being treated combined with the type and volume of medical services contribute to changes in medical costs, NCCI added.
Fee schedules in most states are functioning well as a control mechanism for most categories of medical costs, NCCI said.
Many executives noted that while wages and consumer inflation are rising, workers compensation loss costs and rates are declining. Though employment is strong and economic growth is solid, they question whether the labor market will start to stabilize or if wage inflation is the new normal.
Another concern for executives is how to navigate a changing workplace/workforce, including telecommuters, gig workers, aging workers, inexperienced workers, and an overall shortage of workers, the NCCI added.
Carriers wonder how this shift “changes the profile of workplace injuries and what losses might look like in the future.”
The NCCI points to normalizing turnover rates after the pandemic which should ease concerns about temporary, inexperienced workers.
In addition, increased labor force participation, especially by workers between the ages 25-54, is helping to ease worker shortages.
Though many employees have returned to the workplace, remote work and hybrid schedules persist and are “expected to be lasting effects of the pandemic and key contributors to lowering frequency,” the council added.
Insurance executives are preparing for emerging challenges such as climate change, marijuana legislation, impacts of artificial intelligence, as well as wearables and other new safety technologies and how each will impact the workers compensation environment.