Senior Vice President, Workers’ Compensation
In the third quarter of 2019, workers’ compensation rates fell by just over 5%, with better than 70% of employers experiencing a flat rate renewal or a rate decrease, according to a recent webcast. Moving into 2020, it looks as though insurers are planning to put more workers’ compensation business on the books — a big turnaround compared to a few years ago.
However, moving into the new year, your business clients will find themselves facing a number of key workers’ compensation concerns that could affect their rates and overall profitability. The following are the top three workers’ compensation challenges on deck for 2020.
California Assembly Bill 5 (AB5)
California Assembly Bill 5 was signed into law on September 18. It limits the ability of businesses to classify workers as independent contractors rather than as employees. Simply put, the bill gives workers more labor protections, including workers’ compensation benefits, minimum wage laws, and sick leave.
On January 1, 2020, California AB5 will change the criteria used to classify a worker as an employee or an independent contractor, impacting business models and increasing risks by making it difficult for employers to actually classify workers as independent contractors, and may lead to increased costs for employers. In fact, between minimum wage, overtime, unemployment insurance, workers’ compensation and other benefits, California business owners may see up to a 30% increase in labor costs.
The division between federal and state laws, as well as inconsistent court rulings on workers’ compensation benefits for employees who test positive for marijuana, will continue to be an ongoing issue for employers in 2020, with debates in favor and against marijuana as a form of treatment in workers’ compensation. Today, employers must balance state laws against long-standing federal antidrug policy as well as against employees’ rights, all while working to maintain a safe and drug-free workplace. As marijuana policy evolves and in the absence of legislative guidance, employers will face significant challenges in managing disability, accommodation, drug-testing and workplace safety issues.
Terrorism Risk Insurance Program Reauthorization Act (TRIPRA)
At the end of 2020, the scheduled expiration of TRIPRA is expected to have significant insurance implications for businesses of all types and put extreme pressure on workers’ compensation programs. For policies effective on or after January 1, 2020, insurers will underwrite workers’ compensation policies that contemplate coverage without the potential financial protections provided by the federal backstop. This presents challenges that could lead to increased rates and premiums if uncertainty surrounding TRIPRA’s renewal persists in 2020.
With the uncertainty about TRIPRA’s future, insurers are expected to begin evaluating their books of business and may consider limiting their underwriting of workers’ compensation. The result is likely to include premium increases in workers’ compensation policies and, in turn, significantly impact workers’ compensation renewals.
Staying informed on workers’ compensation issues and trends can help insurers, employers and stakeholders better manage emerging risks. To learn how Worldwide Facilities can help, contact Todd Pollock at 508-625-3547 or firstname.lastname@example.org.