Workers Comp Self Insurance Pandemic Effect – The Quiet Part
Pandemic articles seem to have faded since the start of 2024. One could not read any workers comp publication without reading some type of effect such as the 8871 Class Code Telecommuters meteoric risk due to in-home workers. The Workers Comp self insurance pandemic effect was even more profound. Let us look at why.
Size = Disadvantage
The self insurance pandemic effect reversed what was thought to be an advantage of self insurance. Namely, if a company was large enough, being self-insured was a bargain due to economies of scale.
Two things turned this thinking on its head:
- Self Insurance pandemic effect was negative to Loss Development Factors or LDFs. Smaller companies received a break from treating COVID claims that were caused by being at work. The Rating Bureaus (NCCI, WCIRB, PCRB, etc.) decided not to count COVID claims in Experience Mods. I think this idea solved what could have been a crisis for Workers Comp insurers and insureds alike. Each Rating Bureau included COVID claims under a catastrophe code. The workers comp self insurance pandemic LDFs included some or all of the COVID claims. Some actuaries left them out, but not many.
- Smaller self-insureds payroll fell below what would have been considered more advantageous to not be self-insured. For example, one quick read of the restaurant and service industry companies that went out of business or declined to much smaller numbers would wreck an LDF. Just as with Experience Mods, LDFs need to have steady payroll figures. The self insurance pandemic effect quietly reduced payrolls to a point of having to cover more with less.
Self Insurance Pandemic Effect – Additional Thoughts
One area that J&L noticed over the last few months involves Workers Comp loss runs for self-insureds and Mod sheets for smaller companies – accident rates.
Even though less payroll and workers may exist in companies, the accident rate may not have decreased even though payrolls shrank almost universally. Accident rates spike when new workers begin their employment or when experienced workers that have not attempted a task in a few weeks or months until they were brought back to work out of unemployment. The accident curve affected all companies in this area.
I brought up this point because of so many unexpected accident rates for shrinking and recovering employees. Our loss run and Experience Mod analysis show this to be a trend. This part of the self insurance pandemic effect caused all employers to have higher than expected accident rates.
