The COVID-19 pandemic has had direct and indirect effects on the workers compensation (WC) industry. This article takes a closer look at how the pandemic may have contributed to the anomalous WC results observed for Accident Year (AY) 2020, with a focus on claim frequency and claim severity.1,2
Frequency was unchanged and severity declined in 2020
Overall, claim frequency3 was nearly unchanged in 2020; including COVID-19-related claims, the AY 2020 change in claim frequency was –0.1%. When the reported COVID-19-related claims are excluded from 2020, a larger-than-average annual change of –6.8% results, as shown in the chart below.
Following at least four years of annual increases in countrywide average claim severity,4 NCCI observed decreases in 2020—whether or not the reported COVID-19-related claims were included. A higher frequency of small, less-costly claims (discussed below) along with a higher share of indemnity-only claims (due, in part, to COVID-19-related quarantine claims), contributed to the AY 2020 claim severity decrease.
The frequency of small claims increased
While claims less than $5,000 account for approximately 25% of all AY 2020 claims, they account for almost 90% of WC COVID-19-related claims. During 2020, the frequency of claims in this size category increased by 21%—contributing to this year’s observed decline in average claim severity.
Changes in claim frequency and severity varied across industry groups
Shifts in industry mix had a larger effect on the changes in frequency and severity for 2020 compared with prior years. As shown in the chart below, the Office & Clerical industry group experienced the largest declines in frequency (–5%) and severity (–16%) compared with the other industry groups’ changes. This may be due to having fewer on-site workers as the pandemic caused remote work to become more prevalent. Reported COVID-19-related claims resulted in claim frequency increases during 2020 for the Goods & Services (e.g., hospital employees) and Miscellaneous (e.g., police officers) industry groups—as essential workers (who account for the majority of the WC COVID-19-related claims5) work in many of the occupations in these two industry groups.
Frequency decreased significantly for motor vehicle accidents (MVAs) in 20206
WC MVA frequency decreased significantly more (–14.5%) than the frequency of all claims (–0.1%), with the increased use of remote work and less work-related traveling as contributing factors. The Office & Clerical industry group stands out as having the largest decline in MVA frequency across all industry groups. And while MVA frequency decreased in nearly all states and most class codes in 2020, there were some exceptions. For instance, class codes including essential workers and jobs that persisted throughout the pandemic—such as garbage collectors, mail delivery persons, and fast-food restaurant employees—saw increases in MVA claim frequency.
COVID-19 resulted in an increase in claims relating to the chest/trunk part of body
While claim frequency decreased for most parts of body, those impacted by COVID-19, including chest/trunk and multiple parts/ braces/ miscellaneous, showed increases. After excluding the reported COVID-19-related claims, the 2020 change in claim frequency from these parts of body decreased—indicating that COVID-19 impacted these results. On average, COVID-19-related chest/trunk claims tend to be less costly ($12.8K) than their non-COVID-19 counterparts ($33.4K)—further contributing to the overall observed decline in 2020 claim severity. On an overall basis, the average severity of COVID-19-related claims is approximately one-third the average severity of non-COVID-19-related claims.
Claim frequency for occupational disease and cumulative trauma injuries declined in 2020
Along with the 2020 increase in remote work and, consequently, an increase in concerns related to office equipment, home office space, and ergonomic challenges,7 one may have expected an increase in claims related to occupational disease (excluding COVID-19) and cumulative trauma. However, these claim categories showed a larger-than-average frequency decline in 2020, potentially due to the longer reporting timeline for these types of claims. Occupational disease and cumulative trauma claims account for approximately 1% of all claims and have average severities similar in magnitude to the average severity across all claim types. Because of this, NCCI does not expect annual shifts in these claim categories to materially impact overall industry changes in WC claim frequency or severity.
Conclusion
COVID-19 played a large part in driving the anomalous results seen for AY 2020, including frequency and severity declines, an influx of small claims, and a decline in the number of MVAs. Input from insurers suggests that 2020 was an outlier year and preliminary 2021 experience to date is more in line with historical levels. NCCI will share updated results for AY 2020 claim frequency and severity and a preliminary look at AY 2021 at its
Annual Issues Symposium 2022, scheduled for May 9–11, 2022.
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