Trends to watch: Workers' compensation insurance

We anticipate more business owners utilizing new technologies to minimize injuries to their workers. The prediction is a new and innovative way buyers of WC insurance will start thinking about their purchasing, and that a cost commensurate with the actual exposure is recognized, with a shift to workplace safety in buying behaviors. The focus as an industry will shift towards using technology to avoid a loss before it even occurs.

Competition will remain strong for workers' compensation. States continue approving decreases for the line based on prior-year performance with many states edging past 10% declines. We believe the best-in-class businesses will continue to reap the benefits of these rate decreases.

• Medical inflation remains a concern. While the line has not yet seen the impact of increased medical inflation, the potential exists for medical inflation to erode the line's profit, which will offset gains in the frequency benefit the line has experienced.

• Mega claims are an area to watch. The NCCI has reported increases in mega claims over the past few years. We're seeing more significant claims in parallel with advances in medicine, which allow treatment of catastrophic injuries that may not have been treatable in prior years. Advances in auto safety have also made it possible to survive auto crashes that were not survivable 30 years ago when airbags and other safety features weren't standard.

• The economy is always a factor. If the economy continues growing, we will see newer labor entrants. New employees are more likely to sustain an injury compared to tenured workers. However, if the economy declines, we will see more layoffs, which can lead to retained employees being strained or stressed to produce more with less. This could yield more injuries as employees work longer hours under more stressful conditions.

• The demographics of workers continue to shift. Many older workers left the labor market during the height of the COVID-19 pandemic. If the economy slows, some of these workers may return to work, resulting in older workers in newer positions, potentially increasing claim frequency. Older workers generally take longer to recover from workers' compensation-related injuries, often due to other unrelated health conditions that will impact healing from an injury.

• Wearables and other AI-powered technologies will continue to be adopted by large employers to provide insights into workers' health. Wearables can track biometrics, heart rate, and body temperature. They can alert an employer of an employee in medical distress, promoting immediate action for assistance.
  
  While wearables can be an expensive way to assess employee safety, other less intrusive methods are available. One is TuMeke, an AI-powered tool that can assess an employee's ergonomic safety through a quick video. The TuMeke software analyzes the employee's movements to determine if they may result in potential soft tissue injuries.  Employers can use this information to reconfigure workstations to help reduce or eliminate future claims, keeping workers healthy and safe while protecting an insured's experience modification.

Three things to watch in workers compensation in 2024.

1. Inflation: Inflation will continue to impact overall costs in workers' compensation in 2024. As a greater percentage of open claims involve employees with the significant wage increases seen in 2021 and continuing into 2022, the average disability benefits rate paid on those claims will continue to outpace previous rates. For 2023, Sedgwick data shows a 6% increase in the average daily disability rate with a nearly 3% increase in the average cost for medical payments over 2022.
   
2. Healthcare accessibility will need to continually be monitored: The American Hospital Association estimates that the industry will face a shortage of up to 124,000 physicians by 2033 and it will need to hire at least 200,000 nurses a year to meet rising demands. This shortage obviously has the potential to impact workers' compensation medical benefits from an accessibility standpoint which in turn could impact claim durations, return to work expectations, and other aspects of the workers' compensation process.
   
3. Technology: As is the case in many sectors, the claims industry is collecting more data than ever before. Each step in the claims process yields multiple data points that, with a large enough data set, can be anonymized, tracked, and analyzed to identify patterns and predict claim trajectories over time. Leading edge technology tools will continue to offer opportunities to create efficiencies, transform data into action, enhance service delivery, and improve the experience of the workers' compensation process.