A sharp decline in direct written premiums, low interest rates and continued negative interest rate pressures are likely to create challenges for workers' compensation insurance companies in the coming years, experts say. on the comp line has not been proven, COVID-19 uncertainty can increase these difficulties, they say.
"2020 is an unparalleled year in the approximately 110-year history of employee compensation," said Robert Hartwig, clinical associate professor and director of the Risk and Uncertainty Management Center at the University of South Carolina at Columbia. "Even to this day, we have only recovered about half of the jobs" that were lost when the country went into lockdown in March.
"Some of the lessons here will not come from historical insurance data, they will come from financial experience and economic expectations," he said.
Although employee compensation is still very profitable, pricing trends have put pressure on the line, says James Auden, Chicago-based CEO of Fitch Ratings Inc. [1
The first half of this year saw a direct write-down of the premium of almost 10% amid the sharp decline in employment due to COVID-19 suspensions; however, the claims rate decreased dramatically due to changes in risk exposure, Fitch research shows.
The industry is likely to see long-term effects from the changing risk exposures, such as increased use of telemedicine, reduced travel and more work from home employees, according to Fitch.
Despite the continued high profitability of the labor force, the negative premium interest rate trends are putting pressure on the line, says Auden.
"With the gradual erosion is a factor supporting (workers comp.) Insurance companies, he said." Workers comp has had very good reserve experience over the last two to three years, and I still think there is redundancy in reserves. "
However, the extent to which "provisioning methods will change for 2020 is unclear," says Hartwig. "It is possible that companies will be more careful about releasing reserves in view of the uncertainty. This alone can have a significant impact on increase the combined quota. "
The National Council for Compensation Insurance, which usually provides preliminary estimates of the net wine premium volume and the combined quota at the end of autumn for the current year, declined to provide information" Given the uncertainty surrounding the current pandemic. "
Normally, Boca Raton, Florida-based NCCI would use historical data to provide its first peak 2020 premium volume, but the "very volatile" data from the beginning of the year prevents the credit rating agency from applying its typical historical loss development factors, says Jeff Eddinger, chief executive. for NCCI.
Many questions remain for forecasters, such as what the outcome will be when insurers combine premiums for 2020 and whether different incarnations of COVID-19 disproven adoption laws – currently in place in nine states and proposed in at least a dozen – will lead to an increase in comp claims.  "We have real examples of some of these (COVID-19 claims) – the costs can be millions," said Eddinger. "I think carriers need to be on the lookout for the rare but long-lasting, very expensive, very serious damages and damages. "filing season, similar to the terrorism regulations introduced after 9/11, sat e han.
After 9/11, comp insurers chose not to renew certain policies for employers located in tall buildings or near landmarks, or changed the way they
There are other factors at work that can put down or up prices, such as the hotel industry and airlines that reduce jobs and real estate companies like Amazon add workers, Eddinger said. "Whenever you have a change in the mix of employment, there will be some impact on costs," he said.
"A key measure to keep an eye on is the labor force figures, to give a sense of where the wage exposures are," Hartwig said.
He said that while there is no question that workers have seen significant pay cuts this year and compensation premiums are likely to be down by 2021, he expects the economy to recover faster than in other periods of labor force declines.
"I think most carriers will look past this and understand this is temporary," Hartwig said. "I believe that recovery from COVID will actually be much faster than recovery from the financial crisis, which is not only good for the overall economy but very good news for real estate / accident insurance companies."
More insurance and workers compensation news about the coronavirus crisis here .