Driven by technological advancements, evolving workplace dynamics, and an ever-changing regulatory environment, significant shifts have emerged in how workers’ compensation claims are managed. The pace of change is unlikely to slow, prompting the need for adaptation in claims handling processes.
This change is a contributing factor to the health of the workers’ comp industry, which is showing signs of improved efficiency, stability and improvement. For example, according to a new report from the National Council on Compensation Insurance, lost-time claim frequency declined by 8% in the past year, which is more than twice the rate of the long-term average decline. The report also found that continuous innovation will be pivotal to achieving positive claim results in the face of wage and medical inflation and getting injured workers back to work over the next few years.
This change in claims management we are witnessing brings artificial intelligence into the picture to help manage risk, increase claims efficiency, develop the talent pipeline and ultimately enhance how the claims industry cares for and supports injured workers. These advancements will also significantly impact risk assessment frameworks as AI and data-driven technologies offer tools for predicting and mitigating risks associated with claims—enabling more proactive and effective claims management.
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Momentum is building, and this year, we anticipate several changes that will create ripples across the industry, shaping everything from technology and talent to state regulations and holistic and mental health treatments.
Regulatory Changes, Mental Health And Compensation Challenges
A growing focus on mental health is influencing claims regulations. According to the American Psychiatric Association’s 2024 mental health poll, 43% of surveyed adults said that they feel more anxious today than they did a year ago, an increase over the past two years. Adults reported feeling most anxious about current events (70%), the economy (77%) and gun violence (69%).
In response to increased anxiety and a rise in mental health issues, we anticipate a series of regulatory changes at the individual state level to address workers’ comp claims related to mental health this year. States like New York are already leading the way with newly signed legislation to expand workers’ comp benefits to all employees facing job-related mental health crises. We expect to see this type of legislation increase throughout the year as more leaders and institutions begin to consider mental health claims as a primary injury, even in the absence of physical injury.
The implications for claims management are significant. Adjusters must navigate evolving compensability standards while addressing heightened regulatory scrutiny. Mental health claims could lead to increased fines and penalties, impacting the cost of claims administration.
In parallel, claims processes, including bill review, will need to adapt. The growing emphasis on holistic and mental health treatments will require enhanced methods for identifying qualified providers and updating reimbursement structures. This shift underscores the importance of aligning claims strategies with regulatory changes and emerging healthcare demands.
Wage inflation also poses challenges, potentially influencing average weekly wages (AWW) and compensation rates. Adjusters must prepare for these economic fluctuations and their effects on claims costs.
Technology, Talent And Workflows
In just over two years since generative AI entered the conversation, it comes as no surprise that we expect the pace of change and technology adoption to accelerate exponentially across the workers’ comp industry in 2025. By this time next year, AI will likely play a role in nearly every phase of the injured worker’s care journey—from clinical services to claims processing and everything in between.
For example, in the clinical landscape, AI integration will enhance not only triage but also case management, utilization management and coding. It is important to note, however, that AI will not replace clinicians; instead, it will alleviate administrative burdens, enabling them to focus on what truly matters—engaging with injured workers and their support teams.
AI’s predictive capabilities enable adjusters to identify high-risk claims earlier, allowing for proactive mitigation strategies that reduce exposure. This not only improves outcomes but also helps organizations manage claims more effectively.
Regardless of how AI is implemented or the role it is intended to play, one thing will be true: the human element will remain critical. This is especially important given the proliferation of AI alongside the aging risk management workforce. These two forces are combining to create an opportunity for industry-wide disruption.
As organizations look to increase their AI investments, they must also invest in the future of the industry by developing talent and ensuring the right balance between technology and human expertise. Without intentional efforts, the talent pipeline is at risk of shrinking, making it crucial to develop future professionals while leveraging the knowledge of seasoned experts. By integrating these efforts with technological advancements, claims teams can achieve consistent and effective outcomes.
This year promises to be yet another transformative one for claims management, marked by increased regulatory scrutiny, the accelerated adoption of AI and evolving workforce dynamics. Organizations must adapt to these shifts by refining their risk management strategies, embracing AI and investing in talent development to address emerging complexities effectively. By staying agile, the claims industry can continue to improve outcomes for injured workers while navigating an increasingly dynamic landscape.
Gurtcheff is chief claims officer of CorVel. He joined CorVel in 2019. He has more than 30 years of experience in the industry. His background spans the third-party administrator space, independent insurance and the carrier market.
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