Out Front Ideas with Kimberly and Mark kicks off every year with our popular "20 Issues To Watch" webinar. While there are certainly more than 20 issues to discuss after the last 2 years of newly presented challenges, we focused on the high-impact issues relating to workers compensation, health care, and risk management that need more attention.
We believe these are the essential issues for every risk manager and insurance professional to monitor in 2022.
1. Vaccine Mandates
The vaccine mandates have remained at the forefront of controversy. In December 2021, the Society for Human Resource Management reported that 75 percent of survey respondents said they would not likely require vaccination or testing if the US Supreme Court permanently blocked the mandate. However, large employers have finally received some clarity on the issue after the US Supreme Court's recent ruling blocked President Joe Biden's administration from enforcing a vaccine-or-testing mandate for organizations with over 100 employees.
Alternatively, the Supreme Court allowed the Centers for Medicare and Medicaid Services (CMS) vaccine mandate to go into effect, impacting all healthcare workers at CMS-funded providers. The logistics of the healthcare mandate require working through medical and religious exemption policies, vaccine tracking, and record keeping.
2. 2022 Elections
While all eyes will be on the outcome of the House of Representative and Senate races, it is critical to note the importance of state elections. In the last 2 years, governors have issued emergency orders and used state agencies to regulate the day-to-day lives of their citizens. With 36 gubernatorial seats on the ballot this year and insurance regulated at the state level, insurers will need to pay special attention to changes in appointed regulators, administrative law judges, and insurance department priorities.
3. Talent Challenges
Upskilling and reskilling the workforce to prepare a new generation of claims and risk professionals has long been a focus as mass retirements continue in the industry. Still, the profound changes in the workplace throughout the pandemic created a new set of retention challenges. With many organizations in a work-from-home or hybrid work environment, leaders had to evolve to provide meaningful training and support while ensuring each employee is heard. Organizations committed to recruiting efforts have found success when a stronger emphasis is placed on environmental, social, and governance (ESG); diversity, equity, and inclusion; and employee resource groups.
ESG was unheard of just a few years ago but has become a standard method for evaluating how companies manage a wide variety of social and environmental issues. Many publicly traded companies have already developed formal policies as investors demand transparency around these issues. ESG principles should also include evaluating your vendors, so these principles eventually extend to all companies. In the insurance industry, certain state regulators are implementing ESG standards as a requirement for doing business in that state, which includes things like board composition and prohibitions on doing business with industries such as coal.
5. Technology and Data
Many companies are focusing on digital strategy and data science as crucial components of their value story that transcend the expectations of customers and employees. Data continues to be a key business asset, and it is no longer the size of the data set providing the most significant value. Instead, the value lies in how an organization uses data to create new models, in automation solutions, to improve the underwriting process, and to support a risk manager's awareness of trends and opportunities.
With talent challenges and expectations for improved customer service, there will be new technology evolutions, such as the following.
Improved two-way conversation between claimants and claims professionals, moving beyond texting to real-time online communication
Deployment of intelligence automation, allowing automation of decision-making via artificial intelligence, robotic process automation, machine learning, and natural language processing
Robotic process automation in data entry and policy administration, freeing up employees to work more efficiently and focus on work that requires engagement and critical thinking skills
Companies hyperfocused on balancing technology transformation while preserving the human touch
6. COVID-19 Continued
The pandemic dominates the national conversation, with new cases setting records every week. While the severity in patients seems to be less, it is still wreaking havoc on employers with constantly changing government guidelines and compounding staffing shortages. The pandemic now represents the third-largest insurance industry loss from any catastrophe after Hurricane Katrina and the 9/11 terrorist attacks. There is significant ongoing litigation over COVID-19 coverage, especially regarding business interruption under property insurance and event cancellation coverage. There is also concern about the potential for long-term symptoms from COVID-19 and how that could impact workers compensation.
7. Economic Impact
By the end of 2021, the United States dealt with the highest inflation rate in 39 years, at nearly 7 percent. With rising prices, significant inflation is expected in the first half of 2022 due to ongoing supply chain concerns and a worker shortage. While it is predicted to recede midyear, the National Institute of Economic and Social Research predicts the inflation rate will fall to 2.3 percent by the fourth quarter. Analysts report that the Federal Reserve will likely increase the federal funds rate target at least three times this year, raising interest rates closer to 0.75 percent by the end of the year, after remaining at essentially 0 percent since March 2020.
A fourth-quarter CFO survey by Deloitte found 97 percent expect their spending on labor to increase in 2022, with the CFOs also raising their planned capital spending, hiring, and compensation. Deloitte's 2022 insurance outlook suggests insurers expect accelerated premium growth in the coming year. By all accounts, 2022 should see economic growth of around 3.9 percent. Overall, the gross domestic product is expected to grow by nearly 3 percent in 2022, which is much slower than last year.
8. Independent Contractors versus Employees
An essential element of workers compensation is determining whether a worker is considered an employee or an independent contractor. Unfortunately, this issue has become more complicated with different payroll regulations and varying state legislation. States have attempted to clarify the issue through legislation over the last couple of years, but the courts have invalidated some of those laws. Insurers only seek certainty in who is covered under their policies. While policyholders may abide by every regulation, the courts often find coverage in spite of this.
9. Expansion of Mental Health Access
Mental health care is vital, and millions of Americans face a crisis care shortage. There are 19.86 percent of adults who are experiencing a mental illness, equivalent to 50 million Americans, with 4.91 percent experiencing a severe mental illness. The estimated number of adults with serious suicidal thoughts is over 11.4 million, increasing by 664,000 people from last year's data set.
In November, the Compacts, Access, and Responsible Expansion Act was introduced, aiming to reform medical licensure to expand interstate access to mental health resources, which is desperately needed to ensure a better supply of mental health providers available. Additionally, all telecommunications companies will have to make the necessary changes by July 2022, so calls to 988 will be directed to the current National Suicide Prevention Lifeline call centers after the Federal Communications Commission's designation in July 2020.
Virtual mental health, telepsychiatry, and teletherapy will continue to grow this year. This treatment can remove barriers, like time away from work or family or the potential stigma that some still feel. Aside from the digital well-being companies like Talkspace and BetterHelp, employee assistance programs and telemedicine partners are popular options for employers. Mental Health America and the Center for Workplace Mental Health have additional resources and reports that employers should keep in their toolbox to review the best practice strategies and tips, so employees know that their mental health is of the utmost importance to an organization.
10. PTSD and Presumptions
Presumptions now cover many common diseases, including cancer and heart disease, dramatically increasing the workers compensation costs for public entities. The most recent presumption trend legislation involves post-traumatic stress disorder (PTSD). These laws can create a presumption often without following long-established diagnosis and treatment guidelines, which significantly impacts municipalities' budgets and staffing for law enforcement agencies.
11. Employee Benefit Integration
Talent marketing in 2022 will consistently focus on employee benefits, access to care and services to support living a fulfilled life, company culture, and career opportunities. Benefits can cover various aspects of life, from pet insurance to student loan assistance to well-being programs. While engagement in benefits utilization is higher, the industry may still rely solely on the system in an injured worker's recovery. Employers, payers, and case management firms should strongly consider benefit integration in an injured worker's health and recovery plans. Assessing social determinants of health, employee benefits, and community health resources is critically important for a full recovery.
12. Labor Shortage Impact on Workers Compensation
With a widespread labor shortage impacting every industry, wages rise as businesses compete for workers, translating to higher costs for consumers. The labor shortage partially stems from caregiving challenges due to school and childcare closures. However, some economists believe the labor shortage may be a permanent change as the pandemic accelerated the retirement of the baby boomers.
With workers compensation premiums tied to payrolls, fewer workers mean fewer premiums, and while higher wages may offset this somewhat, overall industry premiums are down. Additionally, inadequately trained staff, longer shifts, and fatigue could lead to increased claims frequency. The costs of workers compensation services are also being impacted by a dramatic increase in rates associated with home healthcare services due to staffing shortages.
13. Return to the Office
Many organizations have continued to push back their return-to-the-office dates while contemplating what a hybrid or agile working environment means for their organization. With company culture entrenched in an office setting, human resources and operations leaders are deeply invested in creating employee connections at work and creating a sense of belonging in the remote work environment. Employees will likely have more options for flexible work hours and when they are in the office, but there are a couple of items to contemplate as workspaces change. How do insurers consider the safety of remote work locations in the insurance and underwriting process? Are employers accurately reporting the state with which people work in a remote work setting? This can have significant tax implications.
14. Future of Communicable Diseases in Workers Compensation
Workers compensation was designed to cover risks particular to employment, from traumatic injuries to occupational diseases, not global pandemics. However, many states have enacted presumptions that COVID-19 is work-related under certain conditions. Some states expanding compensability beyond COVID-19 could open the door to future disease outbreaks being covered under workers compensation.
15. Social Inflation
With nuclear verdicts ever-increasing, social inflation continues to be a problem for businesses and public entities. For some, the result is lowered limits on what protection insurers are willing to provide, leaving businesses uninsured for the full exposure of the nuclear verdicts occurring. This puts the viability of the business at risk. Tort reforms and liability limits could provide some relief, but there seems to be little appetite for these in state legislatures. Eventually, this will impact the supply of services in certain areas, much like runaway medical malpractice awards resulted in a lack of obstetricians in some areas.
16. Evolving Risks and Insurance Coverage Gaps
Coverage gaps developing in response to emerging risks and changing risk profiles continue to challenge risk managers. For example, businesses that used to be able to secure coverage for Legionnaires' disease or other disease outbreaks are now seeing widespread communicable disease exclusions on their policies. The pandemic has also led to tightening policy language around business interruption and event cancellation insurance. Insurers are reducing capacity and raising prices in many liability lines of coverage, including general liability, commercial auto, and public entity liability, resulting in risk managers finding it increasingly difficult to limit all of their potential exposures with insurance coverage.
17. Ransomware and the Cyber Market
Cyber crime is at an all-time high. With the increase in digitization and technology advancements, there are new and evolving cyber-security threats and resilience requirements to keep a business safe. As part of risk mitigation and planning, organizations should know what companies they will use in the event of an attack and what internal teams will need to assist.
The cyber-insurance market has seen many challenges in the past few years, and premiums have soared. Marsh's cyber-insurance market overview released in December 2021 indicates pricing increased an average of 96 percent year-over-year in the third quarter of 2021 as organizations faced an onslaught of cyber attacks. Cyber insurers are less risk tolerant and now require extensive knowledge and awareness of an insured's cyber-security protocols and remediation plan. Even with the improved understanding, a company may experience reduced policy limits and adjustments to the terms and conditions.
18. Burden of Bureaucracy
Workers compensation is the most highly regulated line of insurance, from underwriting policies to claims payments and posting notices governed by rules with associated fines and penalties for mistakes. New regulations were added during the pandemic, but often these didn't consider existing rules that already addressed the concern. The pandemic also exposed outdated regulations, like required paper documents that are physically signed or checks instead of electronic banking or debit cards.
Additionally, staffing challenges at state agencies increase delays in the system, further adding to costs. Modernizing workers compensation starts with efforts to dramatically reduce the administrative burden and make the system more efficient.
19. Evolving Workers Compensation
Employers are furthering their desire to streamline workers compensation claims processing by evaluating intake efficiency, unnecessary or redundant forms, and how their process can improve the stakeholder (adjusters, injured workers, and supervisors) experience. With turnover being a continuing challenge in claims management roles, risk managers and claims managers are more aware of how their approach impacts experience and, thus, engagement.
20. Workplace Violence
Law enforcement officers, healthcare workers, and K–12 teachers and staff have dealt with workplace violence for many years. Now, retailers are facing this issue with rising crime due partly to the lack of prosecutions and inadequate law enforcement staffing levels. The transportation industry is also subjected to frequent assaults on bus drivers, flight attendants, and other workers. While most of these occupations cannot separate themselves from the general public, de-escalation training can help in some situations. The solutions for this issue are complex and must come from a societal level.
Listen to the archive of our complete "20 Issues To Watch in 2022" webinar. Follow @outfrontideas on Twitter and Out Front Ideas with Kimberly and Mark on LinkedIn for more information about upcoming events and webinars.
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