Highlights of the 2020 NCCI Symposium: focus on what coronavirus means for the workers' comp industry

Each year, the National Council on Compensation Insurance (NCCI), which gathers data, analyzes industry trends and legislation and prepares insurance rate and loss cost recommendations holds an Issues Symposium. Needless to say, the virtual event differed from years past, which looked at recent trends to project future performance. Like everything else the pandemic touches, the unknowns make projections a formidable task.

State of the Line

Donna Glenn, NCCI's chief actuary began with a look at where the industry stands, which was good news. Highlights of the State of the Line address include:

• In 2019, the industry reported a combined ratio for private carriers of 85%, making it the sixth consecutive year that the workers' comp line of business has posted an underwriting gain. The two most recent years, including the 83% combined ratio in 2018, showed the lowest workers' comp combined ratio since the 1930s, according to the presentation.
• Years of profitable underwriting and healthy reserves in 2019 in the workers' compensation sector will help the industry weather coronavirus-related claims amidst lower premiums in the coming months.
• Claim frequency continued to decline with average lost-time claim frequency across all 38 states that work with NCCI declined by 4% in 2019.
• Looking at types of injuries, sprains and strains decreased more quickly than most - 5.4%.
• For body parts, back injuries decreased more than other types. Head, brain, and face injuries increased and can be attributable to the increase in motor vehicle accidents, likely the result of smartphone use.
• Average indemnity claim severity increased by 4% relative to the corresponding 2018 value, which was in line with wage growth.
• Medical lost-time claim severity increased by 3%, which is trending faster than personal health care costs.
• The average indemnity claim cost in NCCI states is $54,800, including $25,300 for lost wages and $29,500 for medical costs.

Unlike previous years, the past does not give a lens into the future. It's unknown what level of claims insurers will face from the COVID-19 outbreak or how much premium will be lost as a result of high unemployment. The extent of presumption coverage in states adopting changes to workers' comp laws will be a major factor.

Claim activity unrelated to COVID-19 is also unpredictable. Some employees may delay care or not report claims, and those with existing injuries could see their return to work and recovery hindered by fewer jobs and doctor check-ups. Fears over unemployment can cause workers to file claims over smaller and non-acute workplace injuries.

Coronavirus and the Recession of 2020-Impact on Workers' Compensation

Dr. Robert Hartwig, PhD, CPCU, presented the pandemic's effect on our economy and the workers' compensation system. While the industry has entered the COVID-19 era in a position of significant financial strength, the impact of the pandemic is still unfolding and is unlike anything faced before.

The impact will vary by industry. Sectors hard hit by unemployment, such as hospitality, retail, manufacturing, and tourism will see large drops in premiums. At the same time, there will be upward pressure on costs, as more states pass presumptive laws and exclude COVID-19 claims from Experience Mod ratings. Workers' compensation coverage will spike in severity and frequency for essential workers like those in healthcare.

The bottom line is that the workers' comp line will be severely impacted given the reduction in payrolls, flattened wages, historically low interest rates, and stock market volatility. Dr. Hartwig estimated up to a 25% drop in workers' compensation premium written. He noted insurers have received tens of thousands of claims related to COVID-19. There have been extraordinary efforts to stretch contract language to find coverage where none exists or none was intended - especially in workers' compensation and business interruption.

Workers' compensation research: demographics and medical services

NCCI also released reports prepared by two of its research experts. Latest Trends in Worker Demographics was presented by Barry Lipton, FCAS, MAAA, practice leader, and senior actuary at NCCI. Highlights include:

• The number of older workers (65+) in the workforce continues to increase. This age group will see the largest growth between 2018-2028 (projected 6.1 million more workers), closely followed by those ages 25-44, who will see a projected growth of 4.8 million.
• There has been an increase in accident frequency among older workers and they lose more time for work-related injuries. The average worker will lose eight working days for an injury, while those ages 65 and older, lose an average of 14 days. Falls, slips, trips and overexertion are major causes.
• Short-tenured employees suffer a disproportionate share of total workplace injuries. New workers with under five years of experience account for a third of all injuries, but only make up a fifth of all employment. Workers with five or more years of experience account for another third of all injuries but make up half of all employment.

Raji Chadarevian, director of Medical Regulation and Informatics for NCCI, offered Gen rX-The Next Generation of Medicine. Highlights include:

• In 2012, non-physicians made up 47 percent of all professional services. In 2018, that share has jumped to 59 percent. Non-physicians are composed of professions like physical therapists, physician assistants, and nurse anesthetists.
• There's a massive increase in telemedicine services in response to COVID-19. This trend, which the industry had been slow to adopt, offers potential cost savings and accelerated care.
• Overall opioid use is on the decline, with the share of all prescription claims receiving opioids decreasing 38 percent from 2012-2018.
• One out of every 42 chronic pain claims received mental health services in 2018, a 20% increase since 2012.
• There were 23 physical therapy visits per chronic pain claim during the first year of injury in 2018, a 15% increase since 2012.

Employer takeaways:

• Employers that have experienced a reduction in payroll should be proactive in working with their insurance agent to get the insurance company to adjust premiums now rather than waiting for an audit.
• Employers must accurately document how their operation has changed and affected the classification of employees.
• Given the high costs of indemnity claims, a strong recovery-at-work program and good hiring practices are cornerstones to lower rates.
• Stay focused on all safety measures and maintain a strong risk profile. No one knows exactly how the expected massive increase in costs, coupled with the reductions in premiums, will be paid. Since many of the claims will be exempt from the Experience Mod rating, it's reasonable to guess that it will come from rate increases. Expect to see a tightening market and more rigid underwriting.
• Safety management and loss prevention can put extra focus on short-tenured workers and older workers.
• When the unemployment rate was at record lows, employers relaxed hiring and onboarding practices. Employers in a position to take advantage of a surging labor market pool can make the best choices with good hiring practices.