The annual Focus on 5 survey by the National Council of Compensation Insurance (NCCI) yielded the following issues that are keeping workers comp executives up at night:
Will insurers be able to react quickly enough to preserve rate adequacy if loss costs start to rise after a sustained period of decline?
How does an aging and changing workforce affect industry drivers like claims frequency and severity, along with wage and employment levels?
What does the future hold for medical care costs, given variables like emerging healthcare technology and treatments, issues related to opioids and marijuana in the workplace, and mega-claims associated with seriously ill or injured workers?
Will the gig economy ever grow to the extent that it affects workers comp premium levels? And will insurers develop innovative products to serve that market?
How will rapidly changing workplace technology affect American jobs and the workers comp industry? Can regulation and legislation keep pace?
“It is critically important that we stay on top of the issues affecting our industry,” said Bill Donnell, NCCI president and CEO. “With a better understanding of the concerns of these leaders we can focus on key topics and provide insights that enable more informed decision making across the workers compensation system.”
The gig economy, or independent contract work has been around for centuries. Before the Industrial Revolution, and for some years after, most workers were self-employed or worked in small businesses.
Recently “gig work” has received a lot of buzz due to the rise of technology companies such as Uber, Lyft and TaskRabbit that electronically mediate contract work.
The National Council on Compensation Insurance (NCCI) closely examined the gig economy and nontraditional work arrangements in its 2019 Q2 Economic Briefing. Since workers in nontraditional arrangements rarely receive the same benefits as wage and salary workers, this issue has obvious relevance for workers compensation.
Some of the key takeaways from the Briefing include:
There is mixed evidence about the rise in alternative work. Large surveys have found little change in self-employment and alternative work in the last 10–20 years, but administrative data (such as tax records) shows these types of work arrangements are growing. The evidence suggests little change in the number of Americans in alternative work arrangements as their primary source of income but increasing numbers of people engaging in alternative work arrangements to generate supplemental income.
Today about 30 percent of adults in the U.S. are engaged in some type of informal or alternative work, and lawmakers continue to take notice and investigate ways to regulate workers and companies in this growing sector.
About 4.5 percent of households earned some income from electronically mediated work between April 2017 and March 2018—three times higher than the percentage in the first 12 months of the study period, October 2012 to September 2013. Two-thirds of this 4.5 percent had no income from electronically mediated work in the past month—most people only did electronically mediated work occasionally.
The risk of workers compensation leakage is likely to rise during and after the next recession, whenever that may occur. (Electronically mediated work was in its infancy during the Great Recession.) When firms shed payroll in a future downturn and workers have difficulty finding traditional jobs, then the labor supply for nontraditional work will increase. At the same time, cost-cutting firms will have incentive to experiment. If firms and at least some workers favor new arrangements, then payroll lost in a recession is likely to shift to nontraditional work during recovery.