For small businesses, finding affordable workers’ compensation insurance can be quite challenging, especially in high-risk industries. Katherine Antonello, the president and CEO of EMPLOYERS, believes that while options might seem limited, they are not as scarce as many think. She emphasizes that there are carriers focused on high-risk industries that have the expertise and resources to address these specific needs.
However, even with options available, cost remains a significant issue. Small businesses are feeling the squeeze from rising claim costs, inflation, and increasing operational expenses. Antonello pointed out that although medical costs in workers’ compensation have remained relatively stable, the overall financial pressure on businesses is growing.
Claim costs are a major topic in the industry. While the frequency of claims has been decreasing over the years, the severity of claims is a concern. Antonello highlighted that issues like fraud and abuse contribute to rising costs. The workers’ compensation sector is particularly vulnerable to various types of fraud, including provider, payroll, and claimant fraud. The Coalition Against Insurance Fraud estimates that fraud costs the U.S. about $310 billion annually, and this figure continues to rise.
The digital age has made it easier for fraudsters to exploit the system. To combat this, insurers are turning to predictive analytics to identify suspicious patterns in claims, something that would be impossible for a single adjuster to do manually. By combining data insights with human oversight, insurers can better detect fraud and help prevent minor claims from escalating into costly long-term issues.
Regulatory uncertainty also poses challenges for the insurance industry. One pressing concern is the rapid development of artificial intelligence (AI), which is changing how underwriting and pricing are approached. Antonello noted that regulators need to keep pace with these changes to avoid potential market imbalances.
Economic pressures, such as inflation and uncertainty around future medical costs, add to the complexity of the situation. Antonello stressed the need for regulators to strike a balance in their approach, ensuring that rate adjustments reflect economic realities while maintaining market stability.
The situation in California serves as a cautionary tale. The state has seen many insurers withdraw from the property insurance market due to wildfire risks. While this isn’t directly related to workers’ compensation, it highlights the risks of regulatory inaction. Antonello explained that when many carriers exit a market, it can lead to negative consequences, such as increased costs for consumers and pressure on the remaining insurers.
Despite these challenges, Antonello does not believe that workers’ compensation is becoming harder to manage overall. She argues that this line of business has always been complex due to its ties to the economy and the uncertainty around costs. The statutory nature of workers’ compensation means there is little flexibility in policy terms, making expertise crucial for success in this field.
In summary, while small businesses face hurdles in securing affordable workers’ compensation coverage, there are avenues available. The industry must address rising claim costs, combat fraud, and navigate regulatory uncertainties to create a more stable environment for these businesses.