Inflation is a growing concern for many individuals, businesses and industries across the country. As many insurance companies, agents and other in the industry are experiencing, the commercial insurance market is no exception to these concerns, and this includes the cost of coverages, including workers’ compensation cost.
Like other goods and services, inflation can also elevate the cost of insurance. Looking at workers’ compensation cost, inflation issues have become increasingly evident through various trends—including labor shifts, rising wages, higher medical expenses, and rate adequacy challenges. It’s important for business owners to better understand these trends to learn how to mitigate inflation concerns within their workers’ compensation programs.
Here are some of the factors impacting workers’ compensation cost.
Over the past year, many employees have changed jobs. 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 work-related injuries and illnesses without significantly increasing claim costs.
Promote a safe work environment.
Utilize effective health and safety initiatives on-site 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 reporting claims timely, and take steps toward mitigation when possible.
Insurance prices can be managed by paying monthly or annually. In addition, speak with your insurance agent or broker about finding other ways to manage your workers’ compensation cost as part of your overall insurance coverage.