Navigating Current Trends in Casualty Insurance

Alex Sun


February 15, 2022

Navigating Casualty Insurance Trends

Over the past two years, the casualty insurance industry has endured significant disruptions brought on by the COVID-19 pandemic. The result has been a transformation of nearly every aspect of our lives from the way we work to how we shop, travel and receive medical care. Businesses, too, have had to rethink operations, prioritizing employee and customer safety, while accommodating supply issues, labor shortages and inflation.

With these changes, risk managers face a new landscape of liabilities that is dynamic, fast-paced and unpredictable. By understanding these threats, risk and insurance professionals can better navigate the terrain ahead. 

Mental Health Concerns 

Traditionally, risk managers have not fully considered the implications of mental health. But in today’s COVID times, psychosocial factors must figure into the risk picture. The pandemic brought an unprecedented rise in stress and anxiety, as people worried about contracting a deadly virus, losing loved ones and making ends meet. As many as one-third of Americans showed signs of clinical anxiety or depression in the early months of the pandemic.

Risk managers must be more cognizant of the psychosocial issues that could impact their casualty claims outcomes. To help address these issues, they must ensure workers compensation programs utilize provider networks that not only include specialists, such as pulmonologists, to address COVID cases (see “Costly COVID Presumptions”), but also incorporate mental health providers to treat injuries that might either bring on or intersect with mental health issues, such as depression or post-traumatic stress disorder (PTSD). And for injuries that require painkillers, they must see to it that pharmacy management remains more vigilant than ever, as COVID’s added stressors have given rise to a greater risk of substance abuse, including opioid dependency and addiction.

A particular worry for risk managers is the potential mountain of COVID-19 claims that could impact their workers compensation programs. A December 2021 NCCI COVID report noted that 25 states had some form of law, bill, or special order to cover COVID-related claims either enacted, adopted, or still under consideration. This could be particularly costly if risk managers oversee a workforce with first responders or frontline workers. These individuals are often vulnerable to contracting the virus in the line of duty. In some cases, employees may have died or developed serious, long-lasting symptoms as part of “long-haul” COVID. As such, risk managers must carefully assess and continually monitor how state regulations impact their programs.

More broadly, risk managers should also confer with human resources and executive teams to ensure strategies are in place to foster overall employee wellbeing. In this regard, employee engagement is key. Normalizing the conversation around mental health, and “checking in” with employees can go a long way toward showing employees they are valued.  

Repercussions from a Tight Labor Market

Having endured significant pandemic pressures, people have begun to reevaluate what they really want out of their jobs. In addition to higher compensation and better benefits, many are demanding work/life balance. Those who had been putting up with less-than-optimal conditions have now left in record numbers. The U.S. Bureau of Labor Statistics reported that 4.3 million Americans, about 3% of the entire workforce, resigned from their jobs in December 2021.

Even prior to these changes, risk managers were already experiencing a shortage of casualty claims adjusters due to baby boomers retiring. And an even greater number walked out in what’s been coined as the “Great Resignation.”

During the pandemic, health care represents a field experiencing especially high turnover – this includes the nurses and physicians who care for casualty claimants. The data intelligence company Morning Consult surveyed health care professionals and found 19% had quit their jobs since Feb. 14, 2020. Many of these employees experienced burnout as they have treated a steady succession of COVID-19 patients.

Risk managers have the task of helping their organizations figure out how labor shortages will impact the risk landscape. For example, employees left behind often bear a greater burden, so risk managers may see an increased volume of accidents and injuries among these workers.

They must also ensure provider networks have a deep bench—including telemedicine providers—to circumvent any negative impact caused by the shortage of health care employees. Or, they may need more case managers, as these professionals can play a vital role in coordinating care during a time when the health care system continues to be overrun with demands.

Within this challenging environment, it is difficult for injured claimants to stay engaged in their own treatment and recovery. Additional hurdles include a generally low level of health literacy among patients, reduced face time with physicians, and a higher incidence of preexisting chronic conditions, such as obesity, diabetes and heart disease. All of these factors make it more difficult for injured claimants to navigate complex clinical information without some assistance.  

Risks Related to the New Models of Work

The pandemic prompted a momentous migration to remote work and flexible work schedules, and now employees want these benefits to continue. Many companies have embraced this paradigm and have chosen to relinquish large headquarter offices. In this regard, risk managers may see a reduction in certain insurance costs. But within the context of a hybrid work environment, they must also be on the lookout for new risks.

For example, risk managers may observe differences in the types of work injuries sustained in a remote setting. For example, an increase in repetitive strain and musculoskeletal disorders are resulting from poorly designed home workstations. Many risk managers are employing remote ergonomic evaluations to combat this problem.

In addition, risk managers are also working with HR to ensure new remote work policies are in place, such as setting a defined workspace and set work hours within the home. These protocols help with two important issues—minimizing the likelihood that a home injury is mistaken as a work injury and supporting the work/life balance that employees crave. 

Adopting Technology

The COVID-19 pandemic did have a few silver linings—one of the most notable has been an accelerated adoption of technology. McKinsey estimates that the pandemic sped up digitization by three to seven years.

The casualty insurance industry—despite its historically slow rates of adoption—has been no exception. At the start of 2021, we surveyed 100 industry professionals; 75% of respondents said their organizations had adopted new technologies during the pandemic.

As we move forward, risk managers could see further benefits in terms of process efficiencies and risk intelligence if they continue to optimize the use of technology. For example, in the past, risk management processes, including claims transactions, were fraught with inefficiencies, bottlenecks and delays. Through use of mobile interfaces, and technologies like bots, natural language processing and image recognition, many risk and insurance programs have now automated once manual and labor-intensive loss-reporting processes. This saves time and minimizes errors while freeing staff to focus on more meaningful human interactions that can add value to the claims process and increase employee satisfaction with the work they are performing.

Technology can also help support better decision-making. Today, risk managers are striving to use advanced analytics to pull together and make sense of data from disparate sources. The universe of information has become wider and deeper. By using predictive models, AI and machine learning, risk managers have a greater ability to garner the insights needed to understand what is driving losses and how to shore up exposures—whether it is dealing with a hazard that is poised to cause accidents or implementing a safety program to minimize injuries. Many are even using business intelligence tools to automate decisions. For example, risk-scoring technology is being used to rate provider performance to better hone networks and to assess whether certain claimants would benefit from case management.

Alex Sun is CEO of Enlyte, the parent brand of Mitchell, Genex and Coventry. Enlyte is a provider of cost-containment technology, independent medical exams (IME), provider and specialty networks, case management services, pharmacy benefit and disability management.