JUNE 18, 2020 01:28 PM (EDT)
Best’s Commentary: Expansion of State Workers’ Comp to Include COVID-19 Exposure Would Be Credit Negative for Insurers
FOR IMMEDIATE RELEASE
OLDWICK - JUNE 18, 2020 01:28 PM (EDT)
The Best’s Commentary, titled, “COVID-19: Expansion of State Workers’ Compensation Laws Will Be Credit Negative for Insurers,” notes that a number of U.S. states have begun the process of enacting legislation or have issued executive orders on workers’ compensation coverage for essential employees. These efforts seek to shift the burden to the insurer to prove that an employee contracting COVID-19 did not do so on the job, and come at a time when workers’ compensation writers are stressed by soaring unemployment, lower-for-longer interest rates and rate pressure. These factors were included in AM Best’s decision to revise the outlook on this insurance segment to negative in March 2020. A shift in the burden of proof could lead to significant additional losses to this segment, leading to increased reserve estimates and higher combined ratios. The insurers most at risk, according to the commentary, would be state funds and other workers’ compensation specialists.
Despite heightened risk owing to legislation, AM Best believes that COVID-19-related claims will be manageable for insurers. General claims have declined noticeably in the last few months despite the pandemic. Additionally, the average cost of a COVID-19 claim to date has been substantially lower than that of a non-COVID-19 claim, absent ongoing prescription drug or physical therapy costs. The current landscape and exposure is generally favorable, as more people are working at home in remote settings. However, as states and municipalities relax their stay at home restrictions, a second, more widespread wave of the pandemic may emerge.
AM Best will continue to monitor the legislative moves and their impact on the workers’ compensation segment.
To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=298298 .
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.