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Survey Report

Construction Marketplace Realities 2019 – Workers Compensation

Insurance Consulting and Technology|Workers Compensation
N/A

March 29, 2019

Workers compensation continues with positive results attributable in part to the marked increase in both the insurer and insured’s stake in managing risk, including use of managed care, enforcement of return-to-work programs, nurse triage, fee schedules and telehealth.

Rate predictions

  Trend Range
Workers Compensation Rate Forecast: Increase -4% to +2%

Key takeaway

Workers compensation continues with positive results attributable in part to the marked increase in both the insurer and insured’s stake in managing risk, including use of managed care, enforcement of return-to-work programs, nurse triage, fee schedules and telehealth.

Workers compensation continues to exhibit positive results, serving as a pressure valve to persistent challenges in auto liability and emerging trends in general liability.

  • The line-of-business combined ratio has continuously improved to the lowest level in over half a century, despite investment income remaining below long-term averages for private carriers.
  • NCCI has reported countrywide reductions in advisory rates, loss costs and assigned risk rates for five years running — most recently decreasing further from -5.4% off expiring in 2017 to -9.6% in 2018.
  • The most recent state filings resulted in decreases for all but one NCCI state (LA).
  • Even with state base rate reductions, most carriers are holding steady on discretionary credits and use of deviated filings for renewals and further, offering competitive discounts to win on new business when marketed.
    • Exceptions remain for California and New York, where carrier appetites (and historical results) still cause heartburn for buyers in the private marketplace. In New York, some of the standard markets continue to look beyond loss cost rates and at rising medical costs. Indemnity may be a little less in New York than some other states but, due to Labor Law, there will be additional medical surgeries associated in the build-up of a Labor Law case.

These results are attributable in part to the marked increase in both the insurer and insured’s stake in managing risk, including use of managed care, enforcement of return-to-work programs, nurse triage, fee schedules and telehealth.

Disrupters on the horizon:

  • The aging workforce: The U.S. construction workforce is aging, putting a strain on the pool of skilled workers. This manifests in workers compensation results/trends by way of increased severity and duration of care on the road back to health.
  • Independent contractors/on demand economy for labor: Now, more than ever, individuals are engaging in freelance work as opposed to steady 9 to 5 jobs. The construction industry is not immune to the gig-economy phenomenon. This trend carries benefits and risks; independent contractors can exercise complete flexibility in their schedules and workload; however, ambiguity in medical coverage for injuries occurring “on the job” comes with the territory. Who is really going to be responsible?
  • Opioid epidemic: Per the CDC, opioid overdoses claim more than 40,000 lives each year in the United States, and the numbers are rising. With workplace injuries that often result in some degree of chronic pain, a typical starting point for relief and treatment of construction workers is prescription opioids. State governments and insurers are becoming increasing proactive in mitigating abuse and monitoring for red flags; however, there is still a disparity in governance from one geography to another.
  • The legalization of marijuana: Already legal for medical use in most states in 2019, nine states have legalized it for recreational use as well despite remaining a Schedule I substance under the Controlled Substances Act. This generates challenging scenarios for insureds and policyholders when it concerns use in the workplace.

Source: NCCI State of the Line Guide

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