Do Not Fail to Care
The New Year may greet many employers with falling prices for workers’ compensation insurance.
But getting lulled into risk-management complacency by lower insurance policy pricing is a mistake, more now than ever due to the increased complexity of workers’ compensation claims.
The troubling factors we have all heard about during recent years — an aging workforce, obesity, and pharmaceutical trends — are driving more complex claims that are costly and harder to manage.
That is part of the reason you see private equity’s continued purchase of workers’ compensation service providers. Investors are betting more complex claims will drive steady demand for a range of claims services.
Meanwhile, signs point to downward pressure on insurance policy pricing, at least in many jurisdictions.
During 2014, many states announced workers’ compensation rate decreases. Those falling rates will eventually exert downward pressure on the actual price employers pay during insurance policy renewals.
In addition, a Willis Group Holdings 2015 insurance market forecast released in late October reports that workers’ compensation insurance capacity remains abundant. Some workers’ compensation underwriters are cutting back their offerings or raising their attachment points while others are aggressively growing their market share.
Willis predicts workers’ compensation insurance price adjustments will range between a 5 percent decrease and a 5 percent increase. An 8 percent increase is predicted for California, although California rate increases are at their lowest in years, according to Willis.
With the predicted spread in pricing — as some insurers reduce policy prices to gain market share while others tighten up their offerings — it stands to reason that those employers that manage their claims experience well will receive the better policy renewal deals and a broader range of coverage choices when arranging insurance.
Employers that fail to support safety programs that prevent injuries, or fail to take care of their workers once they are hurt, will eventually pay the cost of more complex claims and the increased services those claims require.
It’s easier for employers to grow complacent about safety and claims mitigation practices when the price of insurance declines. Historically, it’s a common enough reaction to insurance market cycles.
But things are different now with the rise of more costly claims.
Those costlier claims will prevent insurers wanting to remain financially viable from cutting deals on accounts with poor loss histories.
Fortunately, I see more instances of large employers increasing their investments in employee health programs and claims mitigation measures. They are concerned about costs driven by today’s potential for claims to become increasingly complex and they are concerned with worker productivity.
Many of the employers I see taking such measures are larger, self-insured companies. They often, but not always, work harder than insureds to reduce losses because they directly feel their claims’ impact. They also have resources to spend on wellness offerings, ergonomists, corporate medical directors and the like.
But employers with fewer resources can follow their example of taking care of workers.
Regular talks with employees and front-line managers about working safely shouldn’t incur great expense. Likewise, communicating with injured and absent workers to express concern, and hope for a speedy recovery and return to the job doesn’t require a large financial commitment.
Those types of practices do, however, require an employer that cares about its workers and their claims losses.
Employers that fail to care will miss opportunities to gain from a more productive workforce and they won’t be among policyholders enjoying preferred pricing during future policy renewals.