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Payroll declines could lead to dips in comp premiums


High unemployment numbers and drops in payroll totals could lead to declines in workers compensation premiums, even mid-policy, experts say.

While premium reductions will vary depending on industries and policy types, the huge changes wrought by the coronavirus epidemic could affect numerous employers, they say.

In addition, the disputes arising over comp premiums could lead to other changes, including higher rates, they say.

“With layoffs, payrolls are adjusting,” said Renee Dube, New York-based vice president, national property & casualty practice for USI Insurance Services LLC. Given “that’s how the carriers establish premium,” brokers industrywide “are having those conversations” about reductions, she said.

The Department of Labor’s March jobs report showed 701,000 fewer jobs than in February, with the unemployment rate rising to 4.4%. A report released by the Labor Department on April 2 showed that 6.6 million people filed new unemployment claims the last week in March.

Brokers should advocate for mid-term audits and a reduction in premium where the exposure base of policyholders is lower, she said.

“There are a lot of moving parts right now,” she said, including class codes, or industry classifications used in addition to payroll to calculate risks in certain professions. Such class codes could change given some workers who previously traveled now work from home and are less likely to be injured, she said.

Mark Wilhelm, St. Louis-based CEO of Safety National Casualty Corp., noted that payroll reductions aren’t uniform. For example, the hospitality sector has seen drastic reductions in payroll, but health care, retail, logistics and other sectors continue to employ workers and in some cases are adding employees.

“This is hitting industries very unevenly,” Mr. Wilhelm said, adding that, internally, Safety National is just beginning to discuss possible premium reductions for policyholders.

“It’s going to be a case-by-case basis,” he said.

Smaller businesses, many of which use pay-as-you-go comp programs, will likely have an easier time adjusting premiums, said Philip Noftsinger, Roanoke, Virginia-based executive vice president of the business consulting firm CBIZ Inc. “Many will adjust automatically,” he said.

One issue to watch stems from the compensability of worker exposure to COVIS-19, which is typically considered an injury among health care workers but could expand, according to experts.

“The interesting questions we are getting (about coverages) are coming from manufacturing,” said Mr. Noftsinger.

“Even if carriers deny these (COVID-19-related) claims, California attorneys will likely appeal at the (court level) where claims can be kept over for years,” according to a statement issued Monday by Folsom, California-based Samuel Hale LLC, which provides workers compensation services for employers.

Government pressure — bills are already have been introduced in several states — to provide workers compensation benefits to non-health care workers exposed to the virus on the job is also an issue of concern, according to comp experts speaking during a webinar Tuesday.

“Presumption” legislation that would assume a worker contracted the virus in the course of employment would be an “expansion of coverage … with no ability to charge for it,” said Mr. Wilhelm, who spoke during the webinar hosted by his company and Sedgwick Claims Management Services Inc.

“Some states have even tried to include all essential workers. That would take in grocery stores, liquor stores. … Anyone who contracted COVID-19 would have presumed to have gotten it in the workplace,” he said.

More insurance and risk management news on the coronavirus crisis here