Changing trends in Workers’ Compensation claims that can’t be ignored

The workers’ compensation system continues to evolve, reshaping how employers, insurers, and practitioners must approach claims management. Ignoring these trends risks higher costs, increased litigation, and long-term financial exposure.

Complex claims and longer recovery times

As workplace safety improves and automation eliminates lower-severity risk, claim frequency continues to decline. Yet, many claims that remain are harder to treat – often involving surgery, comorbidities, psychosocial factors, and longer recovery. Contributing to this trend are an aging workforce and psychosocial factors.

Employers can counter this with ergonomic assessments, recovery-at-work programs tailored to functional age, early nurse case management, and mental health support. Predictive analytics also helps identify high-risk claims for early intervention.

Advances in medical technology, accident survivability, and longer life expectancy mean the cost of catastrophic injuries, although rare, is rising. Employers must focus on serious injury and fatality (SIF) prevention with a proactive, data-driven approach for early identification of SIF precursors and robust investigation of near misses. Empowering employees to report near misses, verify safeguards, stop work if warranted, and taking prompt corrective actions fosters a strong safety culture.

Rising and earlier litigation
Litigation is growing, not just in frequency, but also in timing. Injured workers are involving attorneys earlier in the claim lifecycle, often driven by animosity toward management, dissatisfaction with adjusters, fear of claim denial, and dislike of the medical provider. At the recent WCI Conference, a representative from third-party claims administrator, Sedgewick, noted a “huge shift,” with some 20 percent of claims coming with an attorney on day one.

Social inflation is also creeping into the industry, with attorneys pushing some claims, that begin as work comp toward negligence lawsuits and nuclear verdicts. Social media, aggressive advertising, and unrealistic expectations of the workers compensation system amplify these pressures.

These trends accelerate costs, complicate resolution, and erode opportunities for proactive claim handling. For most workers, an injury is the first involvement with workers’ comp and many are intimidated by the complexity of the process. Early and continuous engagement that makes injured workers feel valued, clear communication about the workers’ comp process, a strong safety culture, and effective medical coordination are key to preventing litigation escalation.

Healthcare shortages and delayed treatments

Provider shortages, particularly in orthopedics, behavioral health, and pain management, and in rural areas delay treatment, lengthen disability, and increase claim complexity. Lower reimbursement rates and administrative burdens are discouraging some doctors to enter the system.

Employers can combat this trend by offering and educating employees about alternative approaches, such as telemedicine, nurse triage, treatment by nurse practitioners or physician assistants, and direct-access physical therapy. These can reduce both medical and indemnity costs by speeding treatment and recovery and improving worker satisfaction.

Fewer claims adjusters and more open claims

With many seasoned adjusters retiring and fewer new adjusters entering the field, caseloads rise while oversight declines. Furthermore, the healthcare shortage makes it difficult for adjusters to receive timely medical reports on the status of injured workers and claims often linger open longer.

Since early engagement with the injured worker and early medical treatment are key to successful outcomes, employers must be more proactive in claims management. Regular reviews of open claims are critical not only to ensure they are progressing toward resolution, but also to prevent excessive reserves that negatively affect the experience modification rate (EMR).

A reserve (the anticipated dollar amount needed to cover all obligations of the insurer arising from the claim) has the same impact on the EMR as the paid benefits. Claim and payroll data used to calculate the EMR are essentially locked-in on the date the insurance company submits the data to the rating bureau – the valuation date. It’s not the renewal date, so it’s a good idea to ask the broker or insurance carrier, if you don’t know. In most states, it will be extremely difficult to make changes after the valuation date.

As the employer, you have access to employee information that may not have reached the adjuster. An injured worker may have recently returned to work with a doctor’s release or the initial reserve for a shoulder-injury-included surgery, but the medical prognosis changed to physical therapy and the adjuster has not updated the files. It’s essential to review the open claims with your agent 90 days before the valuation date, allowing sufficient time to reduce over-reserved claims.

Longer claim duration for young workers

While higher injury rates of short-tenured workers is not a new trend, claims from Gen Z and other young workers are lasting longer than expected. Experts have suggested that Gen Z’s focus on mental health, work-life balance, lower workplace engagement, and awareness of worker rights are contributing factors.

Savvy employers are collaborating with claim adjusters to develop more supportive and responsive recovery-at-work programs for young workers, leveraging technology with mobile apps for tailored recovery plans, and offering 24/7 nurse triage lines. Some physicians are cautious about using technology, such as app-based recovery tracking, in recovery-at-work efforts, so it’s important to understand their perspectives.

Presumption changes

While the rate of presumption adoption by states has slowed, existing laws have broadened. Most recently, New Jersey enacted a law requiring workers’ compensation to pay for 12 hours of counseling for first responders after certain events.

Minnesota’s DLI released a report, Evaluating PTSD claims in Minnesota’s workers’ compensation system: Findings and recommendations, delivery which provides a comprehensive examination and analysis of PTSD claims in the system and makes recommendations for changes. Denial rates are high and return to work rates are low. It recommends standardizing the date of injury, clearer claim timelines, broadening provider access, and expanding acceptable treatments.

Data expectations rising
Insurance companies increasingly expect employers to provide detailed and proactive data regarding workplace safety and accidents. Yet, many organizations still struggle with incomplete or unmanageable data.

Expectations vary by industry, size, claim history, and region. Examples include leading indicators, medical management, return-to-work and safety program metrics, technology data from wearables or environmental monitoring, and measures addressing mental health and remote work risks. Employers should focus on strengthening their data strategy to identify trends, improve decision-making, proactive risk mitigation, and achieving better outcomes, thereby bolstering their profile and reducing costs.

Social media monitoring helps to identify fraud

According to a Carpe Data report, 6.9 percent of workers’ comp claimants misrepresented their claim, often revealed through social media posts about side jobs. Workers could be reporting injuries from a side gig or working an undisclosed job.

Noting that workers often post revealing information very early in the claim process, the authors encourage employers to monitor social media early and often. If employers and carriers rely on point-in-time social media checks or wait until a claim feels suspicious, they are likely to miss the moment when evidence was most visible.

Rate trend shifts
After years of decline, work comp rates are showing signs of reversal in some states. In California, the workers’ compensation pure premium advisory rate will increase 8.7 percent, effective Sept. 1, the first-rate hike in more than a decade. Washington saw rates rise in Jan. 2025 and Florida had its smallest premium reduction in years. Massachusetts rejected a 7.1 percent rate hike proposal for mid-2025, but the underlying cost factors that prompted the request remain.

Several states have medical fee schedules tied to general inflation. The uncertainty of inflation, tariffs, and the economy increases the unpredictability of both medical and indemnity costs, which insurers will hedge against with increased premiums. Fitch Ratings’ most recent report anticipates a decline in workers’ compensation underwriting profits due to declining rates and reduced reserve redundancies, a trend expected to lead to higher rates. While the potential for rate increases varies by state and many may continue to decline, employers should prepare for potential rate hardening.