CEOs & Stakeholders Identify Workers' Comp Market Trends

This open mic session featured insurance market E- and C-Suite leaders, senior management and industry stakeholders identifying emerging market trends that are important to employers in California.

Panelists included moderator Pamela Ferrandino, National Practice Leader at Willis North America, Bill Rabl, Chief Opperating Officer at ACE Risk Management, Robert Darby, President at Berkshire Hathaway Homestate Companies and Former Chairman of WCIRB, Duane Hercules, President at Safety National, and Michele Tucker, Vice President at CorVel.

What is your short-term rate outlook?

• This year, pricing is flat or up a bit, but nothing near 2012. Accounts performing well or marginally are expecting rate decreases next year. Insureds may get a softer market.

• Loss-sensitive programs are seeing effects on collateral requirements based on how each company is growing. On the premium side, reforms are based on loss experience, however, double-digit rate increases are a thing of the past. Low, single-digit rate increases are expected next year.

• From self-insured and large deductible standpoint, each account stands on its own. For this group, it is not as much about the rate as it is about the SIR or deductible. Frequency is not the issue, but severity is the issue because of medical costs. The market is stabilizing.

Average cost of indemity claims are up a bit, but there is a slight decrease in medical. Is that a trend and what other trends are you seeing in the market?

• We are still seeing a challenge in managing medical costs, which are driving costs and should be the focus of most programs. However, we are also seeing development having to do with reform and seeing costs related to IMR are impactful.

• Opioids are still driving costs, so there must be an aggressive pharmacy management program in place.

• We are seeing claims impacting other health issues – like organ damage, etc. – which becomes part of the claim.

• Part-time employees are driving a good deal of medical and indemnity costs.

• On self-insured and large deductible basis, the unbundled market is an opportunity to be proactive and look for best in class claims services. It's been a great opportunity to get employees the best treatment as quickly as possible, rather than going through the sluggish system.

• Overtreament in general is becoming a large problem. Attorneys will use the threat of additional treatment as getting a settlement. Unnecessary sugeries are also a problem.

• The culture of the company (supporting the culture of safety) and quick action on claims impacts costs in positive way. Technology is opportunity and we are starting to see useful apps for claims and quick action.

• TPAs are doing excellent work in predictive modeling and psychosocial questions to get on issues early to prevent developmental claims.

Predictive modeling is becoming a highly talked about trend. How do you find it useful?

• Actionable analytics are important. Being able to model that depends on the ability to collect good analytics.

• It is useful to look at the proportion of claims that are specific vs. cumulative trauma, and how many of those included litigation. Also, the relationship between management and labor can be very telling.

• We analyze the characteristics of claims that develop and what attributes each has at 12, 6, and 3 months. The earlier you are involved with predictive modeling analysis usually provides better results.

• We use text mining of claims files to find coorelation between written words in claims files vs. resolution.

• Analytics are also useful to price out particular accounts, looking for characterists of certain claims that make them expensive and how do you get them into the hands of your best claims handlers.

• Identifying psychosocial characteristics has been one of the best predictive pieces, identifying comorbidities and mental health. You must identify these items very early and must be very candid with the results.

What is the claim tail impact of presumption claims in municipalities?

• Several presumptive illnesses in California are very difficult to defend, but companies need a process in place to investigate and defend. When you take on a case, you take on more than that illness. They always develop into something later on, which can develop to lifelong medical care. You must have someone actively engaged in managing these claims, with high level of technical experience related to the long-tail claim that can monitor it.

• From the self-insurance standpoint, presumption claims are a huge cost driver. They are very hard to challenge and the success rate is very low. We'll see more and more in the future and that will affect muni budgets moving forward.

• There are a number of bills that are sitting on Governors' desks to expand presumptions which, if signed, will continue to grow costs.

What will be key three years from now?

• Mobile technology and the ability to communicate with injured workers will advance through apps that help with early intervention.

• There will be more focus on employee health and reducing the amount of co-morbidities.

• We'll probably see a new workers' comp reform bill in California and the expansion of presumption laws.

• Predictive modeling will be a necessity in our business.

About the Author

Safety National is a leading provider of alternative risk funding products such as excess workers' compensation, deductible casualty, loss portfolio transfers and reinsurance. Safety National is a strong supporter of industry education and our thought leaders are frequent speakers at conferences around the nation. Safety National is a member of the Tokio Marine Group and is rated “A+” (Superior), Financial Size Category XII, by A.M. Best. To learn more, visit: www.safetynational.com.

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