Talk about change has become tired and cliché for businesses over the past year – though our collective fatigue has made it no less true. Both here in Memphis and around the world, small and medium-sized enterprises that withstood the impact of COVID-19 were still forced to cope with incredible pressures.
For individuals and families, the focus shifted to the most important tiers on the hierarchy of needs: keeping a roof over our heads and food on the table, and a job to sustain both. Similarly, small businesses had to focus on the basics of paying employees, vendors and suppliers, cutting costs, and finding efficiencies however possible.
Workers’ compensation, one of the most critical investments businesses make in their employees’ wellbeing, has been similarly transformed by shifts in ways of working, as well as new challenges in occupational safety and welfare.
More than ever, small businesses are having to balance the delivery of effective benefits with cost constraints, after the COVID-19 pandemic revealed fundamentally weaker financial foundations than once thought. For example, one study found that the median business with more than $10,000 in monthly expenses could only survive for two weeks with the cash they had on hand.
Consider also that in 2018, the average workers’ compensation payout was as high as $78,000 with attorney involvement. Without an attorney, the average cost was a still-significant $16,000. Rising drug prices, which take up an average 14% of a claim according to one estimate, are also contributing to the complexity involved in delivering affordable but effective workers’ comp programs.
The trends fueling all this began accelerating well before the onset of the pandemic. The emergence of the gig economy, and with it an expanding cohort of labor not covered by workers’ compensation, shifted cost burdens and impacted compensation insurance throughout the system. Shortages of workers and healthcare providers have driven increases in both workers’ comp claims and length of disability. Remote work, of course, has introduced the question of whether an employee’s injury can be determined as work-related or not.
After surveying such a busy landscape, it may seem counterintuitive to suggest that the answer to this disruption is more disruption. But embracing change by shifting to new tools and solutions, moving the workers’ compensation model with the new reality of work, is the only way forward.
First, facing increased complexity and a growing web of scenarios from which cases will arise, cutting-edge workers’ compensation programs are those that focus on prevention and work with companies to build robust worker protection measures specific to their individual challenges. Accident and injury prevention goes beyond safety posters and advertisements; instead, it is a process that involves engaging insurance firms, industry experts and medical professionals to craft solutions. As recent research from Deloitte observes, offering companies an array of safety options and partnering with community organizations means more time-consuming and expensive measures, like workplace audits, could decline by as much as 23%.
Second, an increased focus on technology will permit workers’ comp models to navigate disruptions like the COVID-19 pandemic, as well as to continually evolve based on data. This includes the use of predictive analytics to reduce risk and telemedicine to respond to incidents and manage recovery remotely. Workers’ comp tech will also afford both employers and employees the ability to reach quicker claims resolutions, thus much better coordination of care.
Of course, computers are not the drivers of the next generation of workers’ compensation, where human ingenuity and empathy will remain paramount.
Third, as a result, focus on prevention and the introduction of new technologies that may end up favoring local workers’ compensation insurers over larger ones over time. There are always gaps between theoretical answers and practical solutions, with the right workers’ comp partner serving as the bridge. Larger firms may not always have the capacity to conceive personalized programs for prevention and technology, and to boot, may lack the local knowledge to understand the challenges, conditions and nuances unique to that particular market.
As the world of work more deeply evolves, and the needs of employees become more complicated, workers’ compensation models remain sustainable by flexibly moving in the direction of more preventative, technologically driven and bespoke models, thus allowing small businesses to thrive. With these, change may still be inevitable – but uncertainty doesn’t have to be.
Rob Recker is president of Chamber Benefits Inc. (CBI), a wholly-owned subsidiary of the Greater Memphis Chamber. CBI offers a suite of employee benefits products to Chamber members, including MemphisComp, which helps employers manage costs and improve their experience when it comes to workers compensation insurance. For more information, see https://memphischamber.com/MemphisComp.