The Long Predicted Gray Tsunami Has Arrived – As Regulators Suffer Most

For years experts have been talking about the "gray tsunami" that threatened the workers' compensation industry. The crushing wave said to be coming was not one of earth temblors and overwhelming waves, but rather a current of retirement from an aging and long-entrenched workforce. And in the aftermath of Covid and the “great resignation” now underway in America, it appears the devastating force of the long-predicted event is now washing up on our shores.

Dealing with employee turnover and attracting new talent to the industry was a major focus of the All-Committee Conference of the Southern Association of Workers’ Compensation Administrators (SAWCA) held at St. Simon’s Island, Georgia last week. Numerous sessions touched on the issue, and a couple were directly dedicated to the problem. And while the drain of talent and institutional knowledge is a challenge for the private sector, it was clear that it may be a looming disaster for the state agencies that regulate the industry. Some agency heads reported retirement rates of 10% or more, and all were struggling to replace those who were departing.

In the past the biggest issue state agencies faced was having good people poached by the private sector. One administrator in attendance even told us that they took pride in that event when it happened, as it was an acknowledgment of the training and quality they could produce. With the current wave of departures, however, the problem has grown significantly.

Much of the advice offered regarding attracting key talent was quite sound until you juxtapose it with the reality of rigid state policies that do not bend easily when it comes to personnel policies. Competitive pay, flexible work hours, and responsive hiring policies can all be a difficult thing to achieve in a government entity these days. Some regulators mentioned being limited to starting hourly rates that are now close to wages being paid by local fast-food restaurants – restaurants that are paying sign-on bonuses those agencies simply cannot offer. Restaurants, of course, aren’t the only private sector entity competing for employees these days.  

While many of our state regulators are embracing the concept of remote work and flexible hours, some simply cannot make that move due to external state regulations prohibiting those policies. Even when an agency can offer those now highly desirable work environments, they must acknowledge that the winds of political change could reverse any of it overnight. As one regulator told the assembled, they may be able to let people work from home, but we get a “new boss” every 4 or 8 years, and all that may change.” One also lamented that their current administration seems bent on regulatory complexity that simply isn’t helping at the operational level.

Another issue is the process of hiring itself. It seems many of the regulatory systems that oversee our industry are subject to the whims and urgencies (or lack thereof) of external Human Resource departments that are designed to serve all state government entities in their jurisdiction. One regulator lamented it could take several weeks for the HR people in their state to “process” an applicant, and by that time, “they have moved on to something else.”

The regulators who spoke on this issue were candid and direct. I am opting not to “name names” here because who said what is irrelevant. It is important, however, that we understand the challenges they face. Simply stated, many state agencies will, for a variety of reasons, continue to struggle to replace talent that is now leaving or has already left. This should matter to those of us in the private sector.

These regulatory bodies don’t just “set rules” for people to follow. Many of them adjudicate claims. They answer questions, provide training, and produce guidance on important topics. If key people are not in position at these operations, it will slow many of the functions of the industry, affecting claims and ultimately the outcomes they achieve. We already suffer needless delays built into our process. A short-staffed and unresponsive regulatory body will not improve that environment.

Let us hope that legislators and Governors across the nation can recognize these challenges and clear some of the roadblocks their agencies must traverse. If they do not, the regulators' pain will be felt by everyone in the industry.

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