20 Insurance Issues to Watch in 2022
Originally published on Insurance Thought Leadership | January 17, 2022
Out Front Ideas with Kimberly and Mark kicks off every year with our popular 20 Issues to Watch webinar. While there are certainly more than 20 issues to discuss after the last two years of new challenges, we focused on the high-impact issues relating to workers’ compensation, healthcare and risk management that need more attention. These are essential issues for every risk manager and insurance professional to monitor in 2022.
1. Vaccine Mandates
The vaccine mandates have remained at the forefront of controversy. In December, the Society for Human Resource Management (SHRM) reported that 75% of survey respondents said they would not likely require vaccination or testing if the Supreme Court permanently blocked the mandate. However, large employers have finally received some clarity on the issue after the Supreme Court’s recent ruling blocked the Biden administration from enforcing a vaccine-or-testing mandate for organizations with over 100 employees.
Alternatively, SCOTUS allowed the Centers for Medicare & Medicaid Services (CMS) vaccine mandate to go into effect, affecting all healthcare workers at CMS-funded providers. The logistics of the healthcare mandate require working through medical and religious exemption policies, vaccine tracking and record keeping.
2. 2022 Elections
While all eyes will be on the outcome of the House of Representative and Senate races, it is critical to note the importance of state elections. In the last two years, governors have issued emergency orders and used state agencies to regulate the day-to-day lives of their citizens. With 36 gubernatorial seats on the ballot this year and insurance regulated at the state level, carriers will need to pay special attention to changes in appointed regulators, administrative law judges and insurance department priorities.
3. Talent Challenges
Upskilling and reskilling the workforce to prepare a new generation of claims and risk professionals has long been a focus as mass retirements continue in the industry. Still, the profound changes in the workplace throughout the pandemic created a new set of retention challenges. With many organizations in a work-from-home or hybrid work environment, leaders had to evolve to provide meaningful training and support while ensuring each employee is heard. Organizations committed to recruiting efforts have found success when a stronger emphasis is placed on environmental, social, governance (ESG), diversity, equity and inclusion (DEI) and employee resource groups (ERGs).
4. Environmental, Social, Governance (ESG)
ESG was unheard of just a few years ago but has become a standard method for evaluating how companies manage a wide variety of social and environmental issues. Many publicly traded companies have already developed formal policies as investors demand transparency around these issues. ESG principles should also include evaluating your vendors, so these principles eventually extend to all companies. In the insurance industry, certain state regulators are implementing ESG standards as a requirement for doing business in that state, including things like board composition and prohibitions on doing business with industries such as coal.
5. Technology and Data
Many companies are focusing on digital strategy and data science as crucial components of their value story that transcend the expectations of customers and employees. Data continues to be a key business asset, and it is no longer the size of the dataset providing the most significant value. Instead, the value lies in how an organization uses data to create new models, automate solutions, improve the underwriting process and support a risk manager’s awareness of trends and opportunities.
With talent challenges and expectations for improved customer service, there will be technology evolutions, such as:
- Improved two-way conversation between claimants and claims professionals, moving beyond texting to real-time online communication.
- Deployment of intelligence automation, allowing automation of decision making via artificial intelligence (AI), robotic process automation (RPA), machine learning and natural language processing.
- Robotic process automation in data entry and policy administration, freeing employees to work more efficiently and focus on work that requires engagement and critical thinking skills.
- Companies hyper focused on balancing technology transformation while preserving the human touch.
6. COVID-19 Continued
The pandemic dominates the national conversation, with new cases setting records every week. While the severity in patients seems to be lesser, it is still wreaking havoc on employers, with constantly changing government guidelines and compounding staffing shortages. The pandemic now represents the third-largest insurance industry loss from any catastrophe after Hurricane Katrina and the 9/11 terrorist attacks. There is significant litigation over COVID-19 coverage, especially regarding business interruption under property insurance and event cancellation coverage. There is also concern about the potential for long-term symptoms from COVID-19 and how that could affect workers’ compensation.
7. Economic Impact
By the end of 2021, the U.S. dealt with the highest inflation rate in 39 years, at nearly 7%. With rising prices, significant inflation is expected in the first half of 2022 due to supply chain concerns and a worker shortage. Inflation is predicted to recede mid-year, and the National Institute of Economic and Social Research predicts the inflation rate will fall to 2.3% by the fourth quarter. Analysts report that the Federal Reserve will likely increase the federal funds rate target at least three times this year, raising interest rates closer to 0.75% by the end of the year; they have been essentially at 0% since March 2020.
A fourth-quarter chief financial officer (CFO) survey by Deloitte found 97% expect their spending on labor to increase in 2022, with the CFOs also raising their planned capital spending, hiring and compensation. Deloitte’s 2022 insurance outlook suggests insurers expect accelerated premium growth in the coming year. By all accounts, 2022 should see economic growth of around 3.9%. Overall, the gross domestic product is expected to grow by nearly 3% in 2022, which is much slower than last year.
8. Independent Contractors vs. Employees
An essential element of workers’ compensation is determining whether a worker is considered an employee or an independent contractor. Unfortunately, this issue has become more complicated because of different payroll regulations and varying state legislation. States have attempted to clarify the issue through legislation over the last couple of years, but the courts have invalidated some of those laws. Carriers only seek certainty in who is covered under their policies. While policyholders may abide by every regulation, the courts often find coverage in spite of this.
9. Expansion of Mental Health Access
Mental health care is vital, and millions of Americans face a crisis care shortage. 20% of adults are experiencing a mental illness, equivalent to 50 million Americans, with 4.9% experiencing a severe mental illness. The estimated number of adults with serious suicidal thoughts is over 11.4 million, increasing 664,000 people from last year’s data set. In November, the Compacts, Access and Responsible Expansion (CARE) Act was introduced, aiming to reform medical licensure to expand interstate access to mental health resources, which is desperately needed to ensure a better supply of mental health providers. Additionally, all telecommunications companies will have to make the necessary changes by July, so calls to 988 will be directed to the current National Suicide Prevention Lifeline call centers after the Federal Communications Commission (FCC)’s designation in July 2020.
Virtual mental health, telepsychiatry and teletherapy will continue to grow this year. This treatment can remove barriers, like time away from work or family or the potential stigma that some still feel. Aside from the digital well-being companies, like Talkspace and BetterHelp, employee assistance programs (EAP) and telemedicine partners are popular options for employers. Mental Health America and The Center for Workplace Mental Health have additional resources and reports that employers should keep in their toolbox to review the best practice strategies and tips so employees know that their mental health is of the utmost importance to an organization.
10. PTSD and Presumptions
Presumptions now cover many common diseases, including cancer and heart disease, dramatically increasing the workers’ compensation costs for public entities. The most recent presumption legislation trend involves post-traumatic stress disorder (PTSD). These laws can create a presumption often without following long-established diagnosis and treatment guidelines, which significantly affects municipalities’ budgets and staffing for law enforcement agencies.
11. Employee Benefit Integration
Talent marketing in 2022 will consistently focus on employee benefits, access to care and services to support living a fulfilled life, company culture and career opportunities. Benefits can cover various aspects of life, from pet insurance to student loan assistance and well-being programs. While engagement in benefits utilization is higher, the industry may still rely solely on the system in an injured worker’s recovery. Employers, payers, and case management firms should strongly consider benefit integration in an injured worker’s health and recovery plans. Assessing social determinants of health, employee benefits and community health resources is critically important for a full recovery.
12. Labor Shortage Impact on Workers’ Compensation
With a widespread labor shortage affecting every industry, wages rise as businesses compete for workers, translating to higher costs for consumers. The labor shortage partially stems from caregiving challenges due to school and childcare closures. However, some economists believe the labor shortage may be a permanent change as the pandemic accelerated the retirement of the baby boomers.
With workers’ compensation premiums tied to payrolls, fewer workers mean fewer premiums, and, while higher wages may offset this somewhat, overall industry premiums are down. Additionally, inadequately trained staff, longer shifts and fatigue could lead to increased claims frequency. The costs of workers’ compensation services are also being affected by a dramatic increase in rates associated with home health care services due to staffing shortages.
13. Return to the Office
Many organizations have continued to push back their return to the office while contemplating what a hybrid or agile working environment means for their organization. With company culture entrenched in an office setting, HR and operations leaders are deeply invested in creating employee connections at work and creating a sense of belonging in the remote work environment. Employees will likely have more options for flexible work hours and when they are in the office, but there are a couple of items to contemplate as workspaces change. How do carriers consider the safety of remote work locations in the insurance and underwriting process? Are employers accurately reporting the state with which people work in a remote work setting? This can have significant tax implications.
14. Future of Communicable Diseases in Workers’ Compensation
Workers’ compensation was designed to cover risks particular to employment, from traumatic injuries to occupational diseases, not global pandemics. However, many states have enacted presumptions that COVID-19 is work-related under certain conditions. Some states expanding compensability beyond COVID-19 could open the door to future disease outbreaks being covered under workers’ compensation.
15. Social Inflation
With nuclear verdicts ever-increasing, social inflation continues to be a problem for businesses and public entities. For some, the result is lowered limits on what protection carriers are willing to provide, leaving businesses uninsured for the full exposure of the nuclear verdicts occurring. This puts the viability of the business at risk. Tort reforms and liability limits could provide some relief, but there seems to be little appetite for these in state legislatures. Eventually, this will affect the supply of services in certain areas, much like runaway medical malpractice awards resulted in a lack of obstetricians in some areas.
16. Evolving Risks and Insurance Coverage Gaps
Coverage gaps developing in response to emerging risks and changing risk profiles continue to challenge risk managers. For example, businesses that used to be able to secure coverage for Legionnaires’ disease or other disease outbreaks are now seeing widespread communicable disease exclusions on their policies. The pandemic has also led to tightening policy language around business interruption and event cancellation insurance. Carriers are reducing capacity and raising prices in many liability lines of coverage, including general liability, commercial auto and public entity liability, resulting in risk managers finding it increasingly difficult to limit all of their potential exposures with insurance coverage.
17. Ransomware and the Cyber Market
Cybercrime is at an all-time high. With the increase in digitization and technology advancements, there are new and evolving cyber security threats and resilience requirements to keep a business safe. As part of risk mitigation and planning, organizations should know what companies they will use in the event of an attack and what internal teams will need to assist.
The cyber insurance market has seen many challenges in the past few years, and premiums have soared. Marsh’s cyber insurance market overview released in December indicates pricing increased an average of 96% year-over-year in the third quarter of 2021 as organizations faced an onslaught of cyberattacks. Cyber carriers are less risk-tolerant and now require extensive knowledge and awareness of an insured’s cyber security protocols and remediation plan. Even with the improved understanding, a company may experience reduced policy limits and adjustments to the terms and conditions.
18. Burden of Bureaucracy
Workers’ compensation is the most highly regulated line of insurance, from underwriting policies to claims payments and posting notices governed by rules, with associated fines and penalties for mistakes. Regulations were added during the pandemic, but often these didn’t consider existing rules that already addressed the concern. The pandemic also exposed outdated regulations, like required paper documents that are physically signed or checks instead of electronic banking or debit cards.
Additionally, staffing challenges at state agencies increase delays in the system, increasing costs. Modernizing workers’ compensation starts with efforts to dramatically reduce the administrative burden and make the system more efficient.
19. Evolving Workers’ Compensation
Employers are furthering their desire to streamline workers’ compensation claims processing by evaluating intake efficiency and unnecessary or redundant forms and how their process can improve the stakeholder (adjusters, injured workers and supervisors) experience. With turnover being a continuing challenge in claims management roles, risk managers and claims managers are more aware of how their approach affects experience and thus engagement.
20. Workplace Violence
Law enforcement officers, healthcare workers and K-12 teachers and staff have dealt with workplace violence for many years. Now, retailers are facing rising crime. The transportation industry is also subjected to frequent assaults on bus drivers, flight attendants and other workers. While most of these occupations cannot separate themselves from the general public, de-escalation training can help in some situations. The solutions for this issue are complex and must come from a societal level.