Since the Occupational Safety and Health Act was signed into law in 1970, the incidence of work-related injuries and illnesses fell from 11% in 1972 to 3% in 2018, representing an overall positive trend in the workers compensation market.

In 2021, the most recent data available from the U.S. Bureau of Labor Statistics, the rate of illness and injury held at 2.7 cases per 100 full-time private sector workers, the same as in 2020 and a decrease from 2019's 2.8.

While the number of injuries has seen positive progress over the years, insurers are faced with two pressing concerns: a rise in complex claims and the potential for higher risks due to recessionary conditions in the economy.

Agents can assist and educate their clients about these two risks.

Complex Claims

While they may be infrequent, complex claims—those in excess of $500,000 for an injured worker's care—can quickly become problematic, in part, because workers comp policies generally do not impose financial limits.

Medical costs are pressuring results, outpacing inflation by increasing 115% from 2000 to 2023, while costs of all goods and services grew 78%, according to Health System Tracker. Other factors include workers who are new to their jobs or have recently entered the workforce, an aging workforce, distracted driving, and the use of heavy machinery.

Unfortunately, complex workers comp claims are inevitable and how insurers and employers manage such claims is meaningful to agents and clients alike. Carriers that strive to help injured workers recover as completely as possible will generate better long-term results for the employer and the employee. This approach can lessen the chance that claims take a turn for the worse.

Complex claims, however, can point out safety issues that warrant attention. This is borne out by the theory of Heinrich's triangle. Posited by H.W. Heinrich in the 1930s, it states that for every 3,000 unsafe acts, behaviors or conditions, there were 300 near-miss incidents, 29 minor injuries, and one serious injury or death.

Studying those acts and conditions—and being proactive—can yield positive effects on an employer's safety performance, potentially reducing the frequency and severity of claims. Management controls can be a big influence on prevention.

Further, when an employee has suffered an injury, while that misfortune is personal, it also has an impact on their coworkers that can result in direct and indirect costs to the employer. The direct costs of a complex claim can include lost production and property damage, but also depressed employee recruitment and, for employees, more restrictions.

Indirect costs to the company can include loss of reputation and competitiveness, diminished customer relations, idling of key equipment, loss of management time, and regulatory or legal actions. That claim can also lower employee morale, an indirect cost that can potentially balloon.

Recession-Based Risks

Some have speculated that an inflationary economy since 2021 has been affecting workers comp claims through the rising costs of health care costs and rising wages.

Unemployment rates have remained low, which is a positive sign for the economy, but there is concern that federal policymakers might not be able to fight off inflation without shrinking employment. If job cuts occur in significant numbers, adverse long-term workers comp results could be a side effect.

Why? During previous recessionary periods, such as the Great Recession and the housing crisis of 2007-2008, the return-to-work features of workers comp policies became an issue. Because employers were laying off workers, the reduced number of workers made it more difficult for employers to make modified work feasible for injured employees. Having a strong return-to-work program becomes more beneficial in a time of recession.

Complex claims and recession-based risks can lead to higher experience modifications and can increase premiums going forward. Independent agents play a key role in assisting clients by setting the tone for a partnership among agent, carrier and insured.

Additionally, agents can help communicate the vital message that all potential losses, no matter how minor, should be reported to the workers comp carrier.

The best workers comp results happen when there is an ongoing partnership between dedicated professionals diligently working toward excellent results. This begins at the agency and includes the carrier and insured. 

James Greenwald is senior claims leader, workers compensation, and Steve Gibson is risk control consultant, workers compensation, for Westfield Insurance, a U.S.-based property & casualty insurer.