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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance explores the challenges presented by today's business and economic upheaval, as well as the hardening insurance market, and what it means for the captive insurance industry.

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Workers Compensation Captives Face Evolving Issues

Disability Insurance
March 18, 2015

In a recent PropertyCasualty 360 article, “7 key performance indicators to improve workers' comp outcomes” (February 24, 2015), author Stephen Paulin outlines metrics to become more successful in a line of business that is becoming less and less profitable for insurers and reinsurers.

The suggestions, which may appear standard within the insurance industry, are important for captive owners writing workers compensation, because they involve such practices as industry benchmarking and loss control.

There is a sort of mixed bag of evidence floating around the industry as to the overall effectiveness of workers compensation nationwide. A couple of recent studies, as reported in a March 11, 2015, PropertyCasualty 360 article by Michael Grabell, titled "OSHA report echoes ProPublica and NPR's workers' comp findings," examine many new state laws for workers compensation benefits that appear increasingly punitive to injured workers. Meanwhile, insurers and reinsurers alike are increasingly frustrated by the rash of “presumption statutes,” as studied in a 2014 National Council on Compensation Insurance (NCCI) white paper, that extend benefits for firefighters and police well beyond the traditional benefits once offered. This dichotomy is difficult to navigate as a workers compensation underwriter and makes profits uncertain.

Finally, there is the unknown consequence of the Patient Protection and Affordable Care Act (ACA) on the workers compensation marketplace and loss projections. On one hand, greater access to health care will lead to a healthier work force, which will drive down the reliance on workers compensation benefits and expedite healing of workers' injuries since the healthy heal faster than the sick. On the other hand, there is concern that the increased population of health insured will strain the supply of physicians and medical facilities, which will lengthen an injured worker's recovery.

Additionally, there are the highly technical and hard-to-determine consequences of the ACA for workers compensation, as is discussed in a March 16, 2015, Risk & Insurance article, "ACA Could Drive Claims to Workers’ Comp," by Katie Siegel. The ACA is still in its infancy, and its effect across many sectors has yet to be determined.

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