Last year was anything but normal when it came to rate filings, according to the National Council on Compensation Insurance (NCCI). During its annual State of the Line report, the organization indicated some states sustained little impact from the pandemic, while others showed significant changes. Noticeable changes in employment levels, the number of claims and deviations in long-term patterns were noted.

Ratemaking decisions are based on each state’s workers comp system, and the impact of its economy, legislative environment and workers’ comp benefits structure.

Diverse outcomes varied by state, but included:

  • Higher levels of remote work
  • Redefined job duties with less person-to-person contact
  • A reduction in business travel
  • Periods of inflation increases
  • Large declines in reported minor injuries
  • Fluctuation in the mix of business
  • Sustained higher levels of short-tenured workers.

NCCI recommended premium decreases, which varied based on the workers compensation environment and the impact from the pandemic, in nearly all jurisdictions.

States that relied heavily on tourism saw a reduction in service sector employment and impact on their workers comp system.

Other states with large construction, manufacturing and transportation industries saw little change.

In prior seasons, the NCCI used two prior years to determine rate changes. In 2022, its analysts tended toward using three prior years’ experience to determine changes.

Frequency serves as a key cost driver in the workers compensation system, and the NCCI reports that over the long term, the number of claims for the level of exposure has continued to fall.

Examining the loss to premium ratios, NCCI analysts report a consistent rate of decline through the pandemic period and into the most recent data, relating to the construction industry.

In contrast, “we’re seeing some upward pressure on manufacturing and transportation after a consistent decline into 2020,” stated Dan Benzshawel, executive director and actuary for NCCI. “This appears to be explainable by new hires and short-term, short-tenured workers temporarily putting upward pressure on costs.”

The office and clerical industry is exhibiting a new level of “improved experience in 2020 and 2021 compared to what was observed prior to the pandemic. And this seems directly related to increased use in telecommuting,” Benzshawel added.

As a result, there has been a rapid increase in exposure to the clerical telecommuting code—8871, the workers comp classification code for workers telecommuting more that 50 percent of the time.

“Prior to the pandemic, it made up about 1 percent of 8810’s payroll,” he said. Class code 8810 is for “office and clerical not otherwise classified.” According to Benzshawel, “just after a couple of years, it’s increased tenfold and it’s now 10 percent of 8810’s payroll,” he stated.

The suspected influx of ergonomic claims that might arise because of the rapid shift to telecommuting has yet to develop, Benzshawel added.

Looking forward to 2023 and beyond, issues the NCCI will be keeping an eye on include the underwriting cycle and wage inflation, underscoring a concern that medical severity may outpace wages.

“The workers comp system has been stuck in an atypical market for years with both soft and hard market traits,” Benzshawel said. “On the soft market side, we have a wide availability of coverage and there’s strong competition. On the hard market side, there’s improving combined ratios and reserve redundancy.”

“So, what will cause a turn?” he asked.

Benzshawel went on to suggest that whatever it is, it could have a major impact on carriers.

“It may take a significant shock to the system—something that impacts carriers ability to earn strong investment returns or something that reduces their financial capacity to take on risk. It may be a strong economic occurrence, like a recession or a catastrophe impacting the workers comp system,” he said, exploring a few of the possibilities.