Demographics, Health Reform, Economy, Data to Help Define Future

The number of workers over age 55 is quickly growing. Carriers need to understand the physical abilities, limitations, and unique exposures of aging workers to be able to properly assess work safety and wellness programs employers have in place and offer strategies to reduce risks and prevent injuries in their workplaces.

How will the workers’ compensation system be affected by the move to universal healthcare? The two systems are set up differently in many ways. For instance, healthcare reform looks to shifting more costs to the consumer, which creates an incentive for lower utilization. However, injured workers are completely covered by employers and carriers, who bear all the costs. So there is no incentive on the part of the employee to limit expenditures.

Healthcare reform will almost certainly impact company operations. To pay for reforms and coverage expansions, carriers will increase focus on fraud detection and prevention and improved operational efficiencies. It’s highly likely these changes will impact the workers compensation system, as well.

With the economy still reeling from recession, recovery will take a long time. Rising unemployment is eroding payrolls, and because workers comp premium production is directly associated with payroll, premium growth is taking a hit. Carriers should be aware of how their insureds are handling any downsizing of their workforce or reduction in payroll. For example, if companies cut wages but not hours, carriers earn lower premium while assuming the same amount of risk. If a company is using large-scale layoffs to reduce payroll, workplace injuries tend to increase and the number of workers’ comp claims spikes. As the economy recovers, carriers should be aware of how their insureds are handling expansion efforts. As companies create new jobs and hire new employees, workplace injuries tend to increase in jobs where inexperienced workers are more likely to get hurt.

Insurers should not lose focus on the impact of these changes on the premium audit function. Scheduling more physical audits may improve the accuracy of policy premiums, but there is associated cost. Insurers should look to a more focused and measured approach to premium audits.

The stock market is also a challenge. Low investment yields have been pressuring industry underwriting results. Medical costs continue to rise steadily and outpace wages. With troubles in the stock market, indemnity claim costs surpassing wage increases, and premiums decreasing, it’s critical that carriers adhere to sound underwriting practices.

The industry needs to develop new strategies for identifying cost drivers, controlling medical costs, and understanding the impacts and implications of trends. To develop these strategies, insurers should tap into new ways of collecting data, such as using transactional reporting and data reporting standards, and new technologies, such as predictive analytics.

Cadorine is vice president of Information Acquisition, Development, and Service at ISO (www.iso.com). He is responsible for ISO’s workers compensation information products, reinsurance services, and contractual and license products. He is also responsible for development and maintenance of all ISO statistical plans.