Carrier Concerns in the Age of COVID-19
Workers’ compensation insurance carriers have dealt with their fair share of challenges during COVID-19. The rapid degree of change has been more than the industry has ever experienced. At the SAWCA 72nd Annual Convention, this carrier panel uncovered the business challenges and unforeseen impacts resulting from COVID-19.
The panel included:
- Tom Glasson, AIG
- Mark Walls, Safety National
- Jeff Eddinger, NCCI
- Edie Sonn, Pinnacol Assurance
- Andrew Price, Next Level Administrators
- Max Koonce, Sedgwick
Walls: Shortly after we had to quickly pivot to a work-from-home environment, we were suddenly besieged with new regulations and data calls from the regulatory community. At a time when we were laser focused on keeping business moving, which included paying out benefits to injured workers, we were also having to make quick adjustments to our systems to accommodate new requests for information and other various regulatory directives that changed the way we do business. This ranged from the way we calculate premium, the way we underwrite policies and Issuing mandated rebates.
Eddinger: From NCCI’s perspective, we had to make some changes to rules so insurance companies could operate in this environment. One of them specifically dealt with premiums. We started to collect payroll information for furloughed workers. Since those people were not working, employers should not have to pay workers’ comp benefits for them. We created a code to classify those employees so that payroll would not be included in the premium calculation. We also made a decision to exclude COVID-19 claims from the experience rating calculation.
Glasson: There were interesting risk changes to certain industries. For instance, restaurants suddenly had servers driving their personal cars to deliver meals. Are they covered? Their classification changed, becoming more hazardous. Also, keeping up with 50 states worth of rules and regulation changes was difficult. This included what business you could write, what business you could cancel and what business you could not renew. It was a difficult matrix to manage. Finally, many major employers filed for bankruptcy. For the adjuster, that creates issues because those injured workers may not have a job to go back to. This put an additional burden on adjusters and return-to-work plans.
Price: Our biggest dynamic was going to a remote workforce in the matter of about a week. What made it more interesting was that all of our business partners were doing the same thing, including our insureds, attorneys and doctors. We all had to figure out how to work together in a new way.
Sonn: A big challenge for us has been the requirement from our state division of insurance that we not cancel policies for non-payment of premium. Before this mandate, we voluntarily said we would do this through May. Shortly after, it was mandated and they keep extending the timeline based on the Governor’s emergency order. We are now in a position where we have an increasing amount of exposure, but we are not collecting premium. We are fine now, but that is a problematic place for any carrier to be, particularly with no end in sight. Finally, everything has changed for our policyholders, which is extremely challenging for a business that hates uncertainty.
Koonce: Another challenge has been different endorsements that may or may not have been attached to policies for things like communicable diseases. It has been interesting to see how those things play into different policies that our clients have. Prior to this, I had not considered this was an element of our business and how it would apply today.
Claims & Rate Frustrations
Eddinger: NCCI developed a tool that combines NCCI data on costs with the assumptions in order to generate multiple COVID-19 scenarios and impacts on the workers’ compensation system. It considers things like infection rate, report rate, hospitalization rate and death rate. Within that tool, you can filter by certain industries. We do not take a position on legislation, but can offer this data on the cost associated with new rules and regulations. On a separate note, there is no current COVID-19 rate-making data. Any loss costs that we would report right now would not include COVID data in them. Rate making being prospective, we need to start charging loss costs that will be effective in 2021. And without knowing what this pandemic will look like next year, that is difficult or nearly impossible to do, but we are looking at ways to address this in the future.
Walls: It is excluded from the experience mods. Carriers are paying these claims, but the basis of calculating premium is not there.
Eddinger: Do not confuse the fact that, if these claims are excluded from the experience rating, there is premium leakage. Experience rating is revenue neutral, so it means there is no extra money collected through the experience rating program, however, it does affect the individual employers’ premium. I do agree with that. We thought that, because of the nature of this, COVID claims were not reliable to assess safety measures. Things like location can come into play.
Glasson: The number of conference calls between regulators and legislators was absurd. I was overwhelmed by the fact that there were people trying to make laws and write rules who had no understanding of how workers’ compensation works at all, including workplace exposure and how benefits are delivered. Second, there seemed to be an assumption that the system was paralyzed before these new regulations were made. We have been doing what we always do, which is take care of the injured workers. Claims started coming in the door, we investigated them based on the details, and made decisions on their merits. We paid a lot of claims and, sure there were some we denied, but the industry continued to do what we always do.
Price: When this started we had a lot of calls with our attorneys on different claims. Everyone was relying on case law. We have not been here before, so there is no case law to support any of this. This law was based on the general public and, with a remote workforce, the definition of the “general public” changed in a few weeks. This dramatically affects how we define an ordinary disease versus an occupational disease. It will be interesting to see how this plays out.
Koonze: Unless you are an examiner working in the public entity space dealing with presumptions already, presumptions were very unfamiliar territory for most of us. Most examiners had never touched a claim that included a presumption. We had to educate on how you approach the investigation differently, since it is already presumed that the illness happened at work and the burden of proof is now on the employer.
Impacts of Virtual Work
Sonn: Of our 650 employees, we have had fewer than 10 in the office at any given time, and we are not reopening our building this year. We do not foresee a time in the future where we will ever have 650 people in the office again because we really have not missed a beat working remotely. We all miss team cohesion and the social aspect of work, but overall we have seen absolutely no difference in all in effectiveness and timeliness. I am impressed by how well it has worked.
Price: Physical hearings shut down a few months ago and we are beginning to attend them virtually. This makes all the sense in the world. It speeds up the process and, more importantly, it allows all parties to attend and provide input. This helps solve problems because, when it really comes down to it, claims handling requires open communication. I hope this option does not go away.
Walls: I think industry collaboration has been largely impacted. I used to spend 75% of my time on the road at events connecting with people in the industry and discussing how we can improve the system. That informal collaboration has grinded to a halt. You cannot fully achieve that in a virtual meeting. Informal collaboration as an industry makes us all better and we have lost that ability right now.
Glasson: Big picture, I think we have been forced to use technology, so we are not as scared of it as we once were. Virtual hearings and telemedicine have been successful. The system had to keep functioning. Some states lifted rules allowing us to fill prescriptions sooner and file a first report without a physical signature from a supervisor. This worked well and allowed claims to keep moving. Let’s learn from what we have gone through and take the best of that to improve the system moving forward.