Inflation is a common topic and concern amongst individuals and industry. The commercial insurance market is equally concerned. Inflation affects everything from goods and services, to the cost of insurance. In regards to workers’ compensation insurance, certain trends have become increasingly evident as inflation has increased — including labor shifts, rising wages, higher medical expenses and rate adequacy challenges. It’s important for businesses to understand these trends and learn what they can do to mitigate inflation concerns within their workers’ compensation programs.
Here are some of the factors impacting workers’ compensation insurance costs.
Labor shifts.
Over the past year, shifts in the job market can be seen across the board. Short-tenured employees have significantly higher rates of injury than longer-tenured employees, driving up coverage costs, according to the National Council on Compensation Insurance (NCCI).
Wage growth concerns.
In efforts to increase employee retention, many employers have increased workers’ pay. Since payroll calculates workers’ compensation premiums, wage inflation may prompt increased rates.
Health care technology advancements.
Technological advancements have increased treatment costs, contributing to overall claims severity.
Rate adequacy challenges.
The remote work transition has helped to reduce workers’ compensation claims. However, insurance experts are unsure how long these trends will last, making it difficult to accurately determine workers’ compensation exposures and rate adequacy.
To mitigate the rising cost of workers’ compensation insurance, businesses should consider adopting the following practices.
Ensure accurate payroll projections.
Errors in payroll projections can present serious consequences, such as inadequate rates, insufficient benefits or a lack of ample coverage following costly claims.
Review fee schedules.
Pay close attention to applicable workers’ compensation fee schedules, which can help employees receive medical attention for workrelated injuries and illnesses without significantly increasing claim costs.
Promote a safe work environment.
Utilize effective health and safety initiatives onsite and have a return-to-work program in place to help employees resume work after illnesses or injuries.
Manage claims effectively.
Have clear processes for handling workers’ compensation claims as diligently and efficiently as possible.
Contact us today for more guidance on how you can help your comp program:
