Navigating the tangled web of workers’ comp claims in a post-COVID-19 world
The post-COVID-19 world could have quite an impact on workers’ compensation claims from less obvious sources, e.g. non-essential workers, regulators, and the media. It’s expected that healthcare workers and those on the front lines are likely to submit claims, but these other sources of influence could further escalate an insurer’s claim volume. Knowing what to expect and putting the plan together now to manage the spike will help mitigate resource and reputation issues, and fraud risk, as well as help navigate new regulations that could emerge in the aftermath of this pandemic.
Rising Regulations and Declining Reputations
A few months ago, Derrick Wong from Risk & Insurance wrote about the implications for frontline workers, and the actions companies and regulators are taking to address the unique circumstances COVID-19 is creating for employees and their insurers. In Connecticut, some healthcare employees who had been in direct contact with infected patients have contracted the virus, and were denied workers compensation coverage because they couldn’t prove that COVID-19 wasn’t a result of an out-of-work trip to the grocery store or to get gas.
In some states like Kentucky and Washington, state funds are now extending workers’ compensation benefits to first responders and medical personnel. Other insurers are allowing infected employees coverage under short-term disability. But by and large, it is common for the standard workers’ compensation exclusion for “ordinary diseases of life” to be applied and the workers to be left without benefits.
There will most likely be broader changes in regulations nationwide to cover more or all workers as it becomes increasingly apparent that determining how someone contracted coronavirus is going to be problematic, and that’s something insurers should prepare for now.
Looking ahead at the potential for claim system updates like new “cause of loss” codes, new coverages, and changing language within policy documents is an important step in determining how quickly the changes can be made and planning for any necessary resource allocation. If executive orders and legislative actions mandate coverage changes faster than programming development cycles can accommodate, insurers will need a contingency plan in place. Claims systems that use no-code/low-code fast development tools and/or SaaS-delivered solutions will have a much easier time implementing impending regulatory changes should they come. The ability to override processing rules or add new ones without heavy programming, to either allow COVID coverage for a claimant or automatically assign coverage as appropriate, will ensure a more efficient path to compliance. For example, modern systems like Insurity’s claims management solutions would need a simple update to data tables with little system administration or programming needed.
Fallout from ill-conceived applications of the ordinary disease exclusion will likely lead to a public outcry, forcing regulators to require carriers to provide these benefits regardless of exclusions. Carriers who choose to deny such claims may find themselves in a PR crisis that tarnishes their reputation. Being one of the first to publicly step forward and announce voluntary suspension of the ordinary diseases of life exclusion (barring any vaccine) may gain a competitive advantage in brand image and loyalty.
COVID-19 Workers Comp Claims in Hiding Will Emerge
While carriers have benefited from reduced claim volumes due to work-from-home, state shutdowns, and record layoffs, the situation is likely to quickly reverse itself as the country sinks deeper into recession.
A pre-COVID-19 Risk Innovations article quoted NCCI’s senior economist Frank Schmid: “The rate of workplace injury and subsequent workers’ compensation claims drops sharply during recessions and rises sharply during recoveries.” The reductions are generally attributed to employment declines in hazardous industries like construction and the hesitance of employees to file claims when unemployment is rising because they fear for their jobs.
However, COVID-19 poses a unique situation in the workplace. The construction industry actually suffered somewhat less in many areas due to the ability for workers to maintain social distancing while working, and the benefits of reduced human and automobile traffic. In today’s new normal, employees may be less worried about losing a job if their business is at risk of closing completely, as workers’ comp benefits are often better and longer-lasting than unemployment.
Additionally, work-at-home may cause an uptick in claims volume (and fraud) for those employees who tripped over their office chair or had some accident at home during working hours (or not). Because shutdowns have forced employees to work at home, companies might now be held liable for “work-time” accidents.
The well-prepared carrier will implement increased scrutiny of workers’ compensation claims for the foreseeable future as potentially fraudulent claims spike. Moving adjusters and other investigators from the automobile side of the house where claims are declining, may be one source of additional capacity for increased fraud detection.
Another option to mitigate fraud is to update or implement automated fraud detection tools. A variety of software vendors can provide fraud detection tools that are invoked at first report of injury. When enhanced with third-party data, these tools can flag possible fraud at the beginning the claim. In addition to the traditional “unwitnessed soft-tissue injury on a Monday” criteria, data from sources like social media posts, weekly business journals, labor department filings, and newspaper reports of union activity can all paint a more detailed picture of business uncertainty or employee behavior that may have led to a fraudulent injury report. Not to mention, including consortium-sourced data is especially valuable to multiply the effectiveness of carrier models.
How long will carriers need to be extra-vigilant? No one can predict for sure, but it is likely to extend throughout 2020 and into next year as we await a vaccine, and as businesses are able to recover from the shutdowns or complete their dissolution.
At the same time, carriers providing non-workers’ compensation coverage would be well-served to take a lesson from their workers’ comp compatriots and gear up for increased claims in essentially every industry; from travel for trip interruption/travel medical claims, to the neighborhood grocery store who gets blamed by their customers for spreading the virus. No industry should be considered “safe from COVID-19 claims” until the regulatory and healthcare outcomes are fully determined.