NCCI: Covid 'Not the Event We Thought it Would Be'

Sarasota, FL (WorkersCompensation.com) – Looking at the latest stats for workers’ compensation one would hardly know there’s been a pandemic and economic recession going on. NCCI’s 2020 numbers show a profitable line — another combined ratio under 90, a strong reserve position, a continued decrease in claim frequency, and manageable numbers for claim severity. In fact, the only real hint of trouble for 2020 was the 10 percent drop in net written premium, which is easily explained by shrinking payrolls.

The latest numbers follow a year of uncertainty and, in some cases, dire predictions.

“This past year has been humbling. We are all forever changed,” said NCCI President and CEO Bill Donnell, in opening the organization’s virtual Annual Issues Symposium. “Today we have a much clearer picture of 2020. COVID was not the claims event we thought it would be.”

In fact, the results continue many trends that have been seen over the last several years. “The highlights are Deja vu all over again. It’s a similar story,” said Jeff Eddinger, NCCI senior Division Executive, in a meeting with reporters. “Because COVID claim activity was not as bad as feared the results are still extremely good.”

COVID Claims

Nevertheless, COVID claims were clearly a factor in 2020. Among private carriers and state funds in the 38 NCCI jurisdictions, there were 100 death claims. The industry spent $260 million in COVID-related incurred losses in 2020, on 45,000 claims.

Roughly 60 percent of the costs were spent on the 1 percent of high-cost claims. The vast majority of COVID claims were low cost — under $10,000, with the average cost around $6,000.

“We Thought COVID would be devastating for the workers’ compensation system,” said Chief Actuary Donna Glenn. “It was not. It’s strong.”

The majority of COVID claims were for workers at highest risk for complications and severity. Healthcare workers, first responders and other essential workers make up most COVID claims for 2020. Among healthcare workers, those in nursing homes were especially vulnerable to infection and likely to file workers’ compensation claims.

But concerns over COVID claims continue, even for those who have recovered from the virus.

“There is a great industry concern for the potential for long-term disability, permanent partial and even permanent total claims … Even those with mild symptoms could become ‘long haulers,’” said Nadege Bernard-Ahrendts, practice leader and senior actuary for NCCI. “We’re also concerned that possible neurological and psychological challenges could come.”

“Anytime we talk about permanent disability it’s a concern,” Glenn told reporters.  “What we’re trying to do, the best thing to do, is compare COVID loss claims and the infection damage to lungs to comparable types of claims in the past. That’s the only thing we can really do before we get a feel for how these claims will develop. We’re doing a lot of looking and extrapolating from what we’ve learned from past claims.”

The question now is what will happen henceforth.

Going Forward

While optimism has largely replaced the concerns and fears prevalent last year, many questions remain for 2021 and beyond.

“There’s still some uncertainty ahead,” Eddinger said. “Some of the things we’re going to keep our eyes on are:

• How could future surges impact recovery?
• How will vaccines impact 2021 claims?
• How will we manage some of the long-term claims?
• How will enacted presumptions impact loss development?
• Is 2020 an anomaly or will we see lasting effects?”

One question, for example, is whether claim frequency will continue its downward trend. The 7 percent decline in claim frequency for 2020, which excluded COVID claims, can be at least partially explained by more people working remotely and businesses shutting down. With the economy opening up, will frequency continue to decline or will there be the opposite effect?

“It would be one thing if people were coming back to their same jobs, but to the extent they may not be and [may have] found different jobs, a new job with inexperienced workers could surely have an impact in raising our frequency. It could happen,” Glenn said. “We’re not necessarily expecting that, but newer workers tend to create workers’ compensation losses.”

What has not been prevalent, at least to date, are increased musculoskeletal and other claims due to people working in their homes.

“There was a lot of concern or speculation — would we see an increase in frequency with people working at home, such as tripping over the cat,” Eddinger said “I don’t think that that’s necessarily occurred at this point. We don’t know if it’s a long-term concern or if people maybe did better at working from home then people gave them credit for.”

Another question pertains to claim severity. NCCI expects indemnity severity to increase 3 percent in 2020, while the average cost of the medical portion of lost-time claims will be a change of plus or minus 2 percent.

“It’s lower than what we’ve seen in past. It may even decline in 2020,” Glenn said of medical severity. “While one may have expected treatment delays to be a contributing factor, we haven’t seen any evidence of shifts in this area.”

Also on NCCI’s radar are legislative and regulatory issues, especially the increased use of presumptions for certain workers who contract COVID-19. Nine states passed presumption legislation in 2020 while others implemented them through executive order or emergency rules. The conversations continued in 2021, as seven states extended their presumptions. There were 16 states that saw new proposals, although only a couple have been enacted.

“For others not enacted, only a handful made it from one legislative chamber to the other,” said Sean Cooper, practice leader and senior actuary for NCCI. “Regarding mental [health] claims, Connecticut has a proposal which would extend its mental health coverage to include PTSD for healthcare workers impacted by COVID.”

COVID is at the top of the list of concerns in 2021, from both an economic and loss perspective. One question, for example, is how vaccines will impact loss experience.

“What’s very clear today is our workers’ compensation system remains very strong,” Glenn said.

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