Workers' Compensation: Looking Ahead to 2016
The workers’ compensation insurance market remains healthy, and employers should expect generally favorable market conditions to continue into 2016, according to our webcast panel.
The combined ratio for workers’ compensation has steadily declined since 2011, leading to rate reductions for most buyers, said Dan Aronson, US Primary Casualty Placement Leader at Marsh. “Along with the overall downward trend for rates, we’re seeing more companies getting rate reductions, and smaller rate increases in the relatively few instances they occur,” Aronson said.
In a competitive marketplace, Aronson advised that data and analytics can help organizations achieve the best outcomes at upcoming renewals. Analytics can help insurance buyers not only make smarter decisions about structuring their insurance programs, but also demonstrate to underwriters that they have established effective safety and loss control programs. “What were once considered ‘best in class’ approaches to safety are now the norm — [data and analytics] are expected from everyone, rather than being seen as differentiators for a few elite companies. So if you’re not doing this, you’re a step behind the competition.”
During the webcast, panelists also explored evolving legal, regulatory, and industry trends. These include:
- Emerging alternatives to traditional state workers’ compensation systems. Currently, Texas allows employers to “nonsubscribe” to workers’ compensation, while Oklahoma allows select employers to “opt out” of the state’s traditional system. Tennessee and South Carolina are considering similar alternative approaches, and other states may do so in the future.
- Several states’ legalization of marijuana for medicinal and recreational purposes. Legalization presents new concerns for employers, including whether an employee can be fired after failing a post-injury drug test. “This is a completely separate issue from whether a failed drug test voids a workers’ compensation claim,” said Tom Ryan, Market Research Leader in Marsh’s Workers’ Compensation Center of Excellence. “You could be legally permitted to fire an employee for drug use and yet still be on the hook for a claim.”
- The growing use of wellness programs to improve employee health. Wellness programs can be used to target reductions in comorbidities such as obesity and diabetes, which can dramatically increase workers’ compensation costs. “All else being equal, healthier employees are generally less likely to be injured on the job, and tend to recover more quickly when injuries occur,” said Michelle Cruz, a vice president at Marsh Risk Consulting.
In addition, Lynne Watt, manager of claim strategies and analytics at Saint-Gobain discussed strategies her company implemented to reduce workers’ compensation coasts, including wellness and return-to-work programs, training, and education.
“Taking [an] interactive approach is definitely a better way to get our messages out to business units and make sure that they really understand what we’re doing from a workers’ compensation perspective and what their role is in the process,” Ms. Watt said.