The effects of unemployment can be felt across nearly every aspect of the economy, including the insurance sector. Not only does a dip in the workforce impact General Liability policies, but Workers Compensation morphs in conjunction. Let’s explore how and why.
When unemployment rates increase, as they have over the last year and a half, it’s typical to see a temporary decrease in Workers’ Compensation premium. This decrease can usually be attributed to an adjustment in recorded employee payroll. Obviously, if a company’s workforce is cut by half, owners have less insurable interest to cover. This relief can be relished temporarily, but a decrease in workforce arguably poses more problems than solutions.
When there are less workers to carry the load of a fully operational company, workers struggle to keep up with demand. To remain efficient, workers may be asked to work more hours leading to faster employee burnout. This increase in worker fatigue can lead to mindless errors, gradual breakdown of employee physicality and reckless split-second decisions, all of which can lead to injury. Workers may also start cutting crucial corners with standard operating procedures to keep up on tasks. Additionally, when unemployment rates rise, lower-skilled workers may be called on to fill vacant positions. Lower-skilled or inexperienced workers who are trained too quickly have a higher propensity for on-the-job accidents, leading to more Workers’ Compensation claims being filed.
When there are less employees to handle day-to-day operations, business owners might rely on reinstating dated machinery to ease some of the workload. Bringing old machinery out of retirement could be detrimental if those machines were not kept up to code while out of use, leading to equipment breakdown that could injure operators..
Should employees encounter injury on the job during a recession, they could be out of work for longer periods of recovery than if the unemployment rate were at economic standards. Unemployment impacts all industries, including the medical field and if there are less medical providers working, there is ultimately an increased demand for their services. This demand extends waiting periods to see providers meaning that injured workers will be sitting at home trying to mend instead of being prescribed necessary medications and physical therapy to get them back on the job.
\The existence and extension of a Workers Compensation injury leads to higher medical costs, in turn, increased Experience Modifications, and higher Workers Compensation premiums for the industry as well as the individual employer.
We can’t snap our fingers and correct the economy but we can head off the hurt before it happens. NBIG will work with you to create personalized OSHA-compliant safety practices which can be easily implemented within your day-to-day operations. Give our agents a call today to learn more.