Workplace of Tomorrow: The On-Demand Economy and Implications for Workers’ Compensation
At the 2015 NCCI Annual Issues symposium, Robert Harwig, president of the Insurance Information Institute (III), presented a session that addressing the workplace of tomorrow. His session included gender differences in workplace assignments, new definitions of what will constitute a “job” in the future and the increasing “on-demand” nature of of the workplace. Robert’s style is to cram dozens of slides into a 60-minute session, so the information comes fast and furious.
Highlights included:
- 2015 was the second best year for the workers’ compensation industry since the great recession, but profit figures are still less than pre-recession levels.
- Property / Casualty losses and gains are usually driven by catastropic events. However, recently this has been driven by poor investment returns.
- Large underwriting losses are not sustainable in the current interest environment. The industry needs to continue to strengthen its underwriting.
- The fastest growing state across all P&C lines in 2007-2013 is North Dakota by a wide margin due to the growth in the oil industry there.
- Nearly have the states have not seen premium levels return to pre-recession levels.
- Florida’s premium levels are significantly lower than pre-recession levels due to the collapse of the construction industry in that state.
- Investment income in the industry is still below the 2007 pre-recession peak an this figure has declined the last four years.
- Two-third of industry invested assets are in bonds. Because of this, the industry will continue to see low yields for years to come.
- Industry yield on invested assets has continued to decline since 2007.
- A coalition of large employers is aggressively pursuing opt-out legislation in a number of states. Whether or not this will pass in additional states remains to be seen. Right now this is only allowed in Texas and Oklahoma.
- We are seeing increased challenges to the “exclusive remedy” of workers’ compensation and that will continue.
- Workers’ compensation is getting significantly more attention in the mainstream media due to articles published by ProPublica, NPR and OSHA that were critical of the workers’ compensation system.
- Eight years later, we are still not back to pre-recession unemployment rates but, if trends continue, we should reach that level by the end of this year.
- The lowest unemployment rates are in Nebraska and highest are in Oregon.
- Construction and manufacturing account for approximately one-third of all workers’ compensation payroll. Non-residential construction has been increasing, while residential continues to decline. Public sector spending on construction has been flat in recent years. There is hope we will see increased public sector investment into the infrastructure.
- Construction employment is up 17.4% since 2011, but this is still 1.3 million jobs below pre-recession levels. These levels will likely never be reached again because housing construction will not reach pre-recession levels.
- Manufacturing employment is up 7.5% since 2010, but the dollar value of goods shipped has declined which is having a negative impact on this industry.
- America’s energy boom has been a strong driver in economic growth, but recent drops in crude oil prices are having a negative impact on employment in the energy sector.
- The average hourly wage is up 17.2% since 2007, which is very moderate growth. There is hope that legislation to increase minimum wage will boost this figure.
- The number of people participating in the labor force has continued to decline despite a dropping unemployment rate. Social Security disability recipients are at an all-time high.
Workers on Demand
Things like Uber and Amazon Home Services are leading a revolution to a workforce on demand. The use of apps is accelerating the pace of this change. Almost everything we do can now be done online. The on-demand economy has increased the use of temporary workers and this is currently at an all-time high.
On-demand companies are a software driven marketplaces and they position themselves as “platforms” rather than “employers”. The profitability of these companies is in large part driven by the fact that they do not have to provide benefits and are not investing in workers safety and training. There is significant concern that as these on-demand companies become more prominent we will continue to see a decline in workers that have access to benefits such as health insurance and even workers’ compensation coverage.
Currently about 7% of the U.S. workforce is engaged in this on-demand economy. However, Wall Street investors are pushing significant capital into start-ups in this area because of their high profitability so that percentage of the workforce will continue to increase.
Changes in technology will also impact workers’ compensation. It is estimated that, by 2035, 25% of the new vehicle sales could be fully autonomous models. The first driver-less trucks have been licensed. As this automation continues it could have a huge impact on the transportation industry.
This on-demand economy will impact the P&C industry across many lines as there are insurance coverage questions in these areas and we are seeing increased litigation and legislation because of this. Personal lines policies have many exclusions for someone who is using their home or car for a commercial enterprise.