Why Wage Inflation Matters in Workers Comp
Barry Lipton, FCAS, MAAA |
Practice Leader and Senior Actuary, NCCI
The US economy is facing nonuniform wage inflation across the workforce like never before. Barry explored the impact on wages and how this might affect insurers. NCCI leverages the Indemnity Data Call and other data sources to analyze how potential changes in wages could impact the workers compensation system.
- Payroll is a great exposure base because it is inflation sensitive. As wages rise, premiums automatically rise along with workers compensation benefits. Wages, premiums, and indemnity benefits typically stay in balance.
- The Great Reshuffle has happened fast. Low-wage workers are getting the largest pay increases. Workers are also shifting to higher-paying industries. The magnitude of this change may create some short-term disconnects between wages, indemnity benefits, and premiums.
- NCCI’s ratemaking process addresses benefit increases that may be greater than wage inflation.
Why Wage Inflation Matters in Workers Comp Video