Predicting COVID-19’s impact on the workers’ compensation and auto markets is a fluid exercise, as the impact felt will vary by company. However, much will be based on when and how we as a nation resume life post-pandemic.
Here are the trends I’m currently observing:
Unemployment is skyrocketing: US unemployment claims soared to 6.648 million last week—far above the expected 5 million. We have had three (3) record setting weeks in a row of unemployment claims and have lost about 10% of the workforce in that time. The graph below, which reflects only the first week of the three (the next two were both significantly higher) shows the scale of this crisis. Less workers means less premium for carriers, less taxes for the government, and less volume for providers of workers’ compensation services. James Bullard, the president and CEO of the Federal Reserve Bank of St. Louis, has predicted unemployment will hit 30%,which is higher than the Great Depression ever hit at 25% unemployment. Bullard’s prediction would mean a 30% drop in new claims for workers’ compensation in general, as already evidenced by many noteworthy companies laying off or furloughing employees.
Accidents are decreasing: Given the daily news, one might think the overall national death rate is soaring. However, it appears any increases in deaths from COVID-19 are being more than offset by reductions in fatalities from car and workplace accidents, for instance. For weeks 9 through 11 for the four prior years (2016 – 2019), the nation averaged 170,555 deaths. For weeks 9 through 11 this year, the total was 153,015—meaning 17,540 fewer people died in America during the first three weeks of March 2020 than could be reasonably expected. The final data will take some time to come out, but the current trends make sense. Fewer people are driving and physically at work, thereby reducing situations where injuries can occur. Some automobile insurance carriers have chosen to return premium to their policyholders because risks and injuries are so far down. California and other states are starting to mandate premium refunds. Moreover, driving injuries may be reduced permanently as more people and companies adapt to work from home arrangements effectively.
Medical treatment is declining: People cannot or will not get live medical treatment due to social distancing or fear. Elective surgeries are being put on hold nationwide. This can be seen in the financials of hospitals. With the COVID-19 outbreak, one may assume that hospital systems would be overwhelmed but making money. Instead, they are cutting salaries, laying off workers, and experiencing severe financial difficulties. There are even articles such as “where have all the heart attacks gone?” I spoke to a neighbor who sells surgical implants and is often in operating rooms with doctors. His company is currently conducting rolling furloughs. He said all the hospitals are bleeding money.
Layoffs Usually Drive More Workers’ Compensation Claims: People who fear being laid off or fired sometimes file false (or minor) workers’ compensation claims. This could lead toward a short-term spike in new claims.
COVID-19 Covered: For positions that are required to treat patients, including hospital staff and first responders, it is likely COVID-19 will be covered under workers’ compensation policies.
Supply Chain Returning to the US: Due to the difficulties many companies have had (and will continue to have) with various supplies chains, I expect many companies will be hesitant to keep all production and suppliers off-shore in the future, especially if China is involved. While it does not change much in the short-term, we could see a long-term increase in US manufacturing and on-shore workers’ compensation services.
Shift to In-Home Medical Services: Medical care at home will become more accepted and needed. Rising has increased our level of telemedicine and telephonic case management (TCM) to ensure patients continue receiving care during these times. We have also increased in-home services like mail order prescription fulfillment and mail order medical supplies,durable medical equipment (DME), and home health modifications to get patients the care they need outside of hospital settings.
Like every industry, the workers’ compensation and auto markets will retract dramatically in size for as long as our nation is shut down and for some time afterwards. Finding safe and healthy ways to return to normal life is the challenge before us.
Stay safe, stay strong.