Workers’ compensation insurance has been a competitive and profitable market for many years, with insureds enjoying lower rates and ample capacity from insurance companies.

However, shifts in the medical industry, including rising costs and rapidly advancing treatments, are slowly gaining momentum, and experts told Insurance Business that the frequency of fixed claims could soon lead to higher workers’ compensation rates.

“We’ve reached a tipping point,” said Jeff Cole (pictured right), assistant vice president of national accounts at Sentry Insurance. “For the past 10 years, the combined ratios have been below 100 percent. This industry is very profitable, largely because of the low frequency of claims.”

Cole noted that last year’s losses, which boosted the industry’s results, are beginning to narrow, making the market more vulnerable to higher prices in the future.

What are the biggest trends in workers’ compensation?

According to Sentry experts, one of the primary challenges facing workers’ compensation is medical inflation. Medical advances, while improving patient outcomes, contribute to rising costs in workers’ compensation cases, especially in the case of serious injuries.

“There is the potential to improve people’s lives like never before, but these advances are not cheap,” Cole noted. “When these treatments are implemented, they add significant costs to the system.”

Another factor contributing to this inflation is the growth in wages in the medical field, especially for doctors and nurses, which has continued since the outbreak of the pandemic.

“Wage inflation in the medical field has been rising during the Covid pandemic and is still rising,” he said. The shortage of healthcare professionals is driving up wages, putting further pressure on the system.

Jane Feldman (pictured left), senior director of managed care at Sentry Insurance, highlighted an important trend impacting workers’ compensation costs: access to care.

“Access to healthcare is something we think about every day, especially when underwriting national Fortune 1000 clients who operate in multiple locations across jurisdictions,” Feldman said.

“Some areas excel at reimbursing providers according to fee schedules, while others lag. As a result, physicians are leaving the workers’ compensation system due to increased paperwork and administrative burdens.”

Feldman also added that the surge in private practice acquisitions by large hospital systems since the pandemic has put pressure on the health system. Rapid consolidation has reduced the availability of independent providers, who now have to meet the financial goals of their owners.

“It’s something we’re working closely with our national suppliers on, to see what we can do now and in the next three to five years,” Feldman said. “There’s a shortage of physicians and we have to come up with new solutions. That may require us to be more open to using more nurse practitioners and physician assistants.”

Strong demand for worker safety services from insurance companies

As challenges of inflation and access to medical services loom, safety and risk management services play an increasingly important role in preventing workplace injuries.

According to Cole, the big accounts, where companies charge large deductibles, are particularly focused on safety. “These companies often pay the first $2 million or more of each claim, so they are motivated to prevent injuries. The best claim is the one that doesn’t happen,” he said.

Sentry’s safety programs have been a major factor in its 90 percent customer retention rate over the past 20 years. Cole said three-quarters of customers have been with us for five years or more, and half have been with us for a decade or more.

“Our programs are not just one-year solutions,” he added. “We adapt and evolve with medical advances, data analytics and other innovations. We work closely with clients to find long-term solutions to their problems.”

It’s not just medical advances that are impacting risk management, but advances in data as well. By analyzing data, insurers can assess which claims are likely to become more severe and allocate resources accordingly.

Wearable technology is also helping companies improve workplace safety. Some companies are using video analysis to assess worker movements and identify risky behaviors that could lead to injury.

“Using advanced software, they analyze whether an employee is putting themselves at risk, whether it’s through stress on their joints, back or shoulders,” Cole said. “By taking video of each job, they can identify ways to improve the work environment. Maybe an employee shouldn’t be bending over while lifting, or maybe the height of the table needs to be adjusted to prevent strain. It’s a simple but powerful tool to improve safety.”

Finally, VR technology also plays a role in injury prevention and rehabilitation. The technology is now being applied to help injured workers reduce pain, manage anxiety, and improve the overall recovery experience.

Virtual reality therapy is still in its early stages, but Feldman noted that the data so far is promising. “The hope is that this will lead to faster recovery and lower overall claims costs, especially for workers with chronic pain or PTSD,” she said.

But as technology evolves rapidly, the industry must also evolve in its approach to workers’ compensation. Wearable devices, virtual reality, and advanced data analytics are just the beginning of a broader shift within the market, as these innovations push the boundaries of how injuries are prevented and managed.

While technology and analytics have proven to be invaluable tools, the key to success in the workers’ compensation industry remains a strong partnership between insurance companies and their customers.

“All of this is done in partnership with our customers,” Feldman said. “We’re excited about the conversations we’re having with them about these new tools, and we know they’ll continue to evolve. What we do today will likely look different in three years as technology advances so rapidly.”

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