Momentum Builds for Single Leave Mandate
Earlier this year I identified the key disability management-related themes of 2016. The trend of offering paid parental leave is now gaining momentum.
At the end of March, New York state became the fifth state to mandate this type of leave. The program provides employees up to 12 weeks paid time to bond with a new child or to care for a parent, child, spouse, domestic partner, or other family member with a serious health condition.
The duration of the leave doubles the six weeks allotted in California and New Jersey, and is triple the four weeks of paid leave Rhode Island offers.
New York’s law does away with many of the exceptions in similar laws. It will cover full-time and part-time employees, and there will be no exemptions for small businesses. Employees only need to be employed by the company for six months to be eligible.
This raises an important point. Most of the paid leave action is with large companies.
The law does allow employers to limit two employees from taking this benefit at the same time for the same family member, limiting exposure in the case of more than one family member working for the same employer.
Although New York’s paid leave law takes effect on January 1, 2018, it will be gradually phased in with only eight weeks of leave with a 50 percent of pay cap, increasing ultimately to the full 12 weeks at a 67 percent cap by 2021. As is the trend, this is an employee funded benefit through a weekly payroll tax of approximately $1 per employee.
In April, San Francisco’s Board of Supervisors passed the Paid Parental Leave Ordinance (PPLO), making it the first city in the country to enact such an ordinance.
This new law provides supplemental compensation for California employees receiving partially paid leave under California’s Paid Family Leave (PFL) law to bond with a newborn child or newly placed child for adoption or foster care, among other reasons.
During the leave period, the employer will be required to supplement employee pay, so the combination of monies received under the PFL (currently 55 percent wage replacement) and the PPLO will provide compensation equal to 100 percent of the employee’s gross weekly wage.
Payment is made from a worker-funded state disability program and calculated as a percentage of the employee’s wages (55 percent) subject to the maximum weekly benefit amount set by the PFL program. Very similar to the state PFL, there is a cap on the maximum weekly benefit amount of $924, which equates to an individual with a salary of $106,740.
San Francisco’s law will be phased in quickly. In January 2018, all companies with 20 or more employees, with any of those individuals regularly employed in San Francisco, will be required to comply.
Since February, there have been almost weekly announcements about employers adopting or improving their paid leave policies. Here is just a sampling:
- Twitter: 20 weeks of paid parental leave
- Wells Fargo: 16 weeks of paid leave
- Anheuser-Busch: 16 weeks of maternal leave; 2 weeks of paid leave for secondary caregiver (male or female)
Whether aimed at employee attraction or retention, paid leave is now becoming a “must-have” for large organizations.
This raises an important point. Most of the paid leave action is with large companies.
According to the American Action Forum, in companies with 500 or more employees, paid family leave rose a solid 5 percent, from 17 percent in 2010 to 22 percent in 2015. But in companies with fewer than 50 employees, the needle has only moved from 7 percent to 8 percent from 2010 through 2015.
The myriad of laws, regulations, and policies is creating an administrative burden for all companies. And, for many smaller employers, the varying laws and policies are creating an actual competitive disadvantage.
It is likely that employers of all sizes would welcome some consistency in these laws that are leaving some to ask, “Who is going to pay for all of this?”
2016 Outlook: Disability and Absence Management
The disability and absence management landscape continues to experience rapid change. The driving forces are legal and regulatory and a shift in social attitudes about work-life balance. It can be a challenge to keep up; however, there is also great opportunity for disability and absence management professionals to expand their skills and increase their value.
Here are five trends to watch for in 2016:
Paid Leave: A True National Issue
If paid family and sick leave were issues in 2015, they will be the issues of 2016. More large employers will follow the likes of Netflix, Facebook, Microsoft, Adobe, Apple, Amazon, and other leading companies to implement or expand their own leave policies.
And there will be even more efforts to pass paid leave laws in cities and states, including Washington, D.C. and Maryland. Perhaps as important, the democratic presidential nominee will seek to build on FMLA and make paid federal leave a significant campaign issue.
This means more complex process management, heightened compliance demands, and increased public attention to organizations that come under legal or other scrutiny. 2016 is the year in which large numbers of disability and absence management professionals become leave law experts.
ADA Administration Drives Increased Partnering
As with FMLA, more employees than ever are aware of their rights under the ADA. As a result, growing numbers of employers will look to their current short-term disability (STD), long-term disability (LTD) insurance and FMLA partners to help them manage the ADA process.
There are tools and resources, including automated software systems, to help employers manage the accommodation requests and processes associated with ADA. These tools are increasingly cost effective. We will continue to see an increase in partnering to manage growing employee awareness and the accompanying compliance demands.
Workforce Well-Being Moves Front and Center
The Affordable Care Act has given a large and sustained push to preventing illness. This directly impacts the absence and/or disability that accompanies those illnesses.
From gym memberships as a nice employee benefit to workforce well-being, it has moved to a key tool in controlling health care costs. Disability and absence management professionals are being called on to play a larger role in designing and implementing these programs. That will accelerate in 2016.
In addition, an even larger part of workplace well-being will be an emphasis on behavioral health. More disability and absence management professionals, as well as health practitioners, understand the connection between the mind and body in absence, disability, and overall health.
Depression and other mental health issues are increasingly recognized as topics of major concern when it comes to employee well-being. Attention given to these areas brings lower health-related costs, including those related productivity.
Expanded Professional Opportunities
As leave and health care change, absence and disability professionals are confronted with significant new demands. They need to be aware of laws and regulations and new approaches to minimizing health care costs.
In progressive companies, this translates into organization-wide cooperation that enables disability professionals to collaborate with different departments.
This presents professionals with tremendous opportunities to expand their networks, skills, and credentials. 2016 will see at least one new professional designation.
With it and the continued accumulation of new skills, disability and absence management professionals will add more value to their organizations. The result will be a new level of professional and personal rewards.
Increase in Strategic Enforcement From the EEOC
The EEOC’s interest has shifted from individual violations to more systemic workplace discrimination and this includes pregnancy discrimination. Systemic investigations and cases are effective at addressing workplace discrimination issues on a broad scale in an industry, profession, company, or even a specific geographic area.
The EEOC issued guidance making clear that failing to accommodate pregnant employees may expose employers to Americans with Disabilities Act claims based on temporary disabilities caused by pregnancy.
So what does this mean for you in 2016? Employers will need to ensure they are paying attention to policies, practices, and processes for employees taking leave.
Leave has become a political and social issue. It, along with all forms of absence and disability, have caught the attention of many in the “C suite”. That means we will all hear more about these topics in 2016.
Commercial Auto Warning: Emerging Frequency and Severity Trends Threaten Policyholders
The slow but steady climb out of the Great Recession means businesses can finally transition out of survival mode and set their sights on growth and expansion.
The construction, retail and energy sectors in particular are enjoying an influx of business — but getting back on their feet doesn’t come free of challenges.
Increasingly, expensive commercial auto losses hamper the upward trend. From 2012 to 2015, auto loss costs increased a cumulative 20 percent, according to the Insurance Services Office.
“Since the recession ended, commercial auto losses have challenged businesses trying to grow,” said David Blessing, SVP and Chief Underwriting Officer for National Insurance Casualty at Liberty Mutual Insurance. “As the economy improves and businesses expand, it means there are more vehicles on the road covering more miles. That is pushing up the frequency of auto accidents.”
For companies with transportation exposure, costly auto losses can hinder continued growth. Buyers who partner closely with their insurance brokers and carriers to understand these risks – and the consultative support and tools available to manage them – are better positioned to protect their employees, fleets, and businesses.
Liberty Mutual’s David Blessing discusses key challenges in the commercial auto market.
“Since the recession ended, commercial auto losses have challenged businesses trying to grow. As the economy improves and businesses expand, it means there are more vehicles on the road covering more miles. That is pushing up the frequency of auto accidents.”
–David Blessing, SVP and Chief Underwriting Officer for National Insurance Casualty, Liberty Mutual Insurance
More Accidents, More Dollars
Rising claims costs typically stem from either increased frequency or severity — but in the case of commercial auto, it’s both. This presents risk managers with the unique challenge of blunting a double-edged sword.
Cumulative miles driven in February, 2016, were up 5.6 percent compared to February, 2015, Blessing said. Unfortunately, inexperienced drivers are at the helm for a good portion of those miles.
A severe shortage of experienced commercial drivers — nearing 50,000 by the end of 2015, according to the American Trucking Association — means a limited pool to choose from. Drivers completing unfamiliar routes or lacking practice behind the wheel translate into more accidents, but companies facing intense competition for experienced drivers with good driving records may be tempted to let risk management best practices slip, like proper driver screening and training.
Distracted driving, whether it’s as a result of using a phone, eating, or reading directions, is another factor contributing to the number of accidents on the road. Recent findings from the National Safety Council indicate that as much as 27% of crashes involved drivers talking or texting on cell phones.
The factors driving increased frequency in the commercial auto market.
In addition to increased frequency, a variety of other factors are driving up claim severity, resulting in higher payments for both bodily injury and property damage.
Treating those injured in a commercial auto accident is more expensive than ever as medical costs rise at a faster rate than the overall Consumer Price Index.
“Medical inflation continues to go up by about three percent, whereas the core CPI is closer to two percent,” Blessing said.
Changing physical medicine fee schedules in some states also drive up commercial auto claim costs. California, for example, increased the cost of physical medicine by 38 percent over the past two years and will increase it by a total of 64 percent by the end of 2017.
And then there is the cost of repairing and replacing damaged vehicles.
“There are a lot of new vehicles on the road, and those cost more to repair and replace,” Blessing said. “In the last few years, heavy truck sales have increased at double digit rates — 15 percent in 2014, followed by an additional 11 percent in 2015.”
The impact is seen in the industry-wide combined ratio for commercial auto coverage, which per Conning, increased from 103 in 2014 to 105 for 2015, and is forecast to grow to nearly 110 by 2018.
None of these trends show signs of slowing or reversing, especially as the advent of driverless technology introduces its own risks and makes new vehicles all the more valuable. Now is the time to reign in auto exposure, before the cost of claims balloons even further.
The factors driving up commercial auto claims severity.
Data Opens Window to Driver Behavior
To better manage the total cost of commercial auto insurance, Blessing believes risk management should focus on the driver, not just the vehicle. In this journey, fleet telematics data plays a key role, unlocking insight on the driver behavior that contributes to accidents.
“Roughly half of large fleets have telematics built into their trucks,” Blessing said. “Traditionally, they are used to improve business performance by managing maintenance and routing to better control fuel costs. But we see opportunity there to improve driver performance, and so do risk managers.”
Liberty Mutual’s Managing Vital Driver Performance tool helps clients parse through data provided by telematics vendors and apply it toward cultivating safer driving habits.
“Risk managers can get overwhelmed with all of the data coming out of telematics. They may not know how to set the right parameters, or they get too many alerts from the provider,” Blessing said.
“We can help take that data and turn it into a concrete plan of action the customer can use to build a better risk management program by monitoring driver behavior, identifying the root causes of poor driving performance and developing training and other approaches to improve performance.”
Actions risk managers can take to better manage commercial auto frequency and severity trends.
Rather than focusing on the vehicle, the Managing Vital Driver Performance tool focuses on the driver, looking for indicators of aggressive driving that may lead to accidents, such as speeding, sharp turns and hard or sudden braking.
The tool helps a risk manager see if drivers consistently exhibit any of these behaviors, and take actions to improve driving performance before an accident happens. Liberty’s risk control consultants can also interview drivers to drill deeper into the data and find out what causes those behaviors in the first place.
Sometimes patterns of unsafe driving reveal issues at the management level.
“Our behavior-based program is also for supervisors and managers, not just drivers,” Blessing said. “This is where we help them set the tone and expectations with their drivers.”
For example, if data analysis and interviews reveal that fatigue factors into poor driving performance, management can identify ways to address that fatigue, including changing assigned work levels and requirements. Are drivers expected to make too many deliveries in a single shift, or are they required to interact with dispatch while driving?
“Management support of safety is so important, and work levels and expectations should be realistic,” Blessing said.
A Consultative Approach
In addition to its Managing Vital Driver Performance tool, Liberty’s team of risk control consultants helps commercial auto policyholders establish screening criteria for new drivers, creating a “driver scorecard” to reflect a potential new hire’s driving record, any Motor Vehicle Reports, years of experience, and familiarity with the type of vehicle that a company uses.
“Our whole approach is consultative,” Blessing said. “We probe and listen and try to understand a client’s strengths and challenges, and then make recommendations to help them establish the best practices they need.”
“With our approach and tools, we do something no one else in the industry does, which is perform the root cause analysis to help prevent accidents, better protecting a commercial auto policyholder’s employees and bottom line.”
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.