Comp Claim Costs, Economy Will Challenge Industry in '10
Last year will go down in history as one of the most tumultuous on record for the property and casualty insurance industry. However, some analysts are hopeful that 2010 will see improvements in the world of workers' compensation.
A new report from Avizent, a national claims and risk management service provider, predicted a better year ahead but cautioned that burdensome new legislation coupled with a difficult economy would continue to create challenges for the industry.
Top trends. Based on analytical forecasts for 2010 and quarterly reviews and discussions with clients, Avizent outlined several trends it believes will most significantly impact the workers' comp marketplace in the coming year.
- The severity and cost of claims will continue to increase. While the frequency of claims is declining, Avizent said the severity and overall cost -- particularly for permanent total claims -- have increased significantly.
- Employers will demand greater accountability for every dollar spent. While the scrutiny on cost will affect every facet of workers' comp and liability programs, Avizent said strategies such as subrogation recoveries and captive risk sharing arrangements will gain prominence to control expenses. In addition, the report noted that benchmarking and widespread auditing of claims files will grow and will be increasingly important to ensure compliance with regulatory requirements and internal best practices.
- Use of specialists and providers will expand. Due in part to increases in injury severity, Avizent said employers will look to specialists, ranging from neurosurgeons to orthopedic diagnosticians, to provide better outcomes, quicker return to work, and more effective cost control. In addition, the firm predicted networks will expand to include psychiatrists, psychologists and other counselors.
- Employers will focus on engaging their injured workers. For years, some employers had an attitude of "out of sight, out of mind" with regard to injured workers. As a result, some employees ended up on disability much longer than necessary. The firm said that new research is showing that when supervisors and managers engage employees throughout their recovery and treatment process, it can help reduce disability costs and get injured workers back on the job faster.
- Renew the focus on best outcomes. According to Avizent, third-party administrators and self-insured employers will push adjusters to ensure that they are minimizing potential financial "leakage" and maximizing every opportunity for the best outcome on every claim. The company predicted that strategies such as utilizing a network of experienced workers' comp providers, earlier clinical intervention, proper diagnostic evaluation, and peer-to-peer communication will expand as ways to control costs and help workers return to their jobs. The focus on outcomes, the report noted, creates opportunities for employers to reduce costs while improving the overall health and safety of their employees.
- Technology will be moved to more areas within the industry. Technology has been an important tool to effectively manage the lifecycle of claims and improve program costs for the past decade. While there remain pockets of technological innovation, Avizent said the insurance industry remains well behind most other segments. As the focus on cost-efficiencies and outcomes grows, the company predicted that technology will gain importance in areas of compliance and training, expanding opportunities for improvement in a wider array of program elements.
- Wellness will come to work. Traditionally, there has been a barrier between workers' comp and wellness programs -- primarily because wellness is typically considered a group health benefit while workers' comp falls under property and casualty insurance. However, according to Avizent, with the success wellness programs have had in improving productivity and with research indicating that healthier employees have lower workers' comp expenses if injured, there will be more coordination and integration between the two areas.
- It will become OK to call in sick. According to Avizent, the H1N1 flu has changed employers' attitudes about calling in sick. Health care experts remained concerned that the winter of 2010 could see even more cases of H1N1. To adjust, the company said employers are instituting new policies and encouraging employees not to come to work if ill.
Challenges ahead.
While these will be significant, Avizent said most industry experts believe one of the greatest concerns will be new legislation. With health care reform influx, the company said the industry remains uncertain as to its impact on workers' comp programs. In addition, legislation proposing the creation of a national commission on state workers' comp laws was introduced in 2009. The bill would create a commission of appointees to examine every state's workers' comp program, which many believe could become a precursor to federal legislation.
"The complex legislative decisions currently being considered could have a dramatic impact on the workers' comp arena and create more challenges for employers in 2010," said Thomas Watson, CEO of Avizent.
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March 8, 2010 Copyright 2010© LRP Publications
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