Despite the devastating impact of the COVID-19 pandemic on many industries, the workers compensation industry continued to remain healthy, stable and profitable through 2020 and into 2021.

While pandemic-related claims and losses were reported, most notably for front-line workers, the overall financial impact of the pandemic has been manageable for the workers comp market. Yet, as a number of trends continue to evolve, uncertainty remains. 

“The pandemic has had an impact on workers comp profitability; however, the impact has been far less than initially projected," says Becky Pinto, president, workers compensation programs, Arrowhead General Insurance Agency. “The industries most heavily impacted as a result of the pandemic have included hospitality and retail from an employment and remuneration perspective, while industries that employ essential workers were most impacted from a claims perspective."

Recently, the National Council on Compensation Insurance (NCCI) announced that the combined ratio for the 2020 workers comp industry was 87%, indicating the profitability of the sector despite the pandemic.

However, “a trend in increased claim severity at the end of 2020 is expected to continue through 2021, while the continuation of the observed decline in claims frequency is uncertain," says Erin Stober, assistant vice president, casualty underwriting, EMC Insurance Companies.

“Claims frequency may be impacted by an increase in inexperienced workers in the market as the economy grows," she says. On the other hand, the NCCI is continuing to monitor developments in “emerging technology-rated trends of telemedicine, wearables and the growing gig economy" which are all expected to impact the workers comp industry in the future.

The impact of the pandemic on non-COVID-19 claims “could turn out to be more significant than direct COVID-19 claims with more employees working from home, fewer in-person medical visits, delayed treatments and procedures, and fewer return-to-work opportunities," Stober says.

“It's important to look at the impact of the flow of claims from two sides," says Song Kim, senior vice president, construction. “On the one hand, the lack of access to medical care for non-urgent matters, including surgeries, as well as court closures during the first several months of the pandemic caused delays in claim cycle times," Kim explains. “As the economy opens up, we'll likely see a return to normal new loss frequencies; conversely, technology advances in the way of telemedicine have accelerated improvements in treatment delays."

On the other hand, however, “industries that have moved to more remote work staff may see increases in ergonomic-related claims, for example carpal tunnel and cervical strains," Kim says. 

Currently, in some areas of the country “it feels as though the frequency of COVID-19 claims have dropped off as vaccinations across some states have steadily increased," says Dave Garcia, president, Rancho Mesa Insurance Services Inc. “Nevertheless, specific niches like home health care, long-term care facilities, and other non-profit organizations who cater to the elderly could be impacted for years to come by pandemic workers comp claims."

The NCCI is continuing to monitor trends that are expected to impact the workers comp industry and one such trend is the COVID-19 workers comp presumption of compensability. In 2020, nine states “enacted laws which presumed that workers in certain industries who contracted COVID-19 did so in the course of employment, thereby making it a compensable workers comp claim," says Scott Lange, director of corporate underwriting and products, Sentry Insurance. “The emergence of these new claims, however, was offset by a reduction in other workers comp claims due to businesses shutting down, workers being put on furlough, or switching to a remote work environment."

As we move through 2021, the NCCI is currently tracking the presumption of compensability laws in 20 states, some of which are hoping to expand COVID-19 coverage to include additional categories of workers in addition to frontline healthcare workers already covered. Some states are also looking to extend coverage beyond 2021. 

Another trend of concern for the workers comp industry is that of workplace violence. Almost two million Americans are victims of occupational violence every year, according to the Occupational Safety and Health Administration (OSHA). And while most cases are isolated incidences, there has been a 40% increase in active shooter acts of violence over the same period in 2020, according to data from the Gun Violence Archive. 

Occupational violence is covered under most workers comp insurance policies, providing coverage for employees that suffer physical injuries and mental distress from such incidents. 

Currently, the workers comp industry continues to demonstrate the strongest reserve position of any property-casualty line of business while additionally experiencing declining premium rates in response to favorable results over the past few years, according to Fitch Ratings. This is the exact inverse of other p-c lines of business.

As the economy grows and workplaces reopen, it remains to be seen how differing trends will impact the market.

Olivia Overman is IA content editor.