20 Workers Comp Issues To Watch in 2025

1. Climate Change

For risk managers and insurers, climate change is not a political discussion. Weather risks are intensifying and becoming increasingly unpredictable. Hurricane Helene destroyed major interstates in western North Carolina and eastern Tennessee, where flood damage was unexpected. The Los Angeles wildfires have devastated the second-largest metropolitan area in the United States, forcing over 200,000 people to evacuate. Additionally, California regulations have restricted insurers from using catastrophe modeling instead of historical losses to appropriately adjust premiums, creating an unsustainable business model. Over the last 2 years, this has resulted in cancellations or nonrenewals in wildfire-prone areas.

2. Mental Health and Well-Being

Expanded mental health care facilities, digital health solutions, and practitioners offering online services are opening access for more patients. Interventional psychiatry is also using advanced treatments, like brain stimulation, new medications, and enhanced psychotherapy, to manage difficult-to-treat mental health conditions. From an employer perspective, people leaders must be upskilled to understand the impact of disabilities and neurodiversity on their employees. Understanding how these differences impact their performance and interactions can lead to better opportunities for retaining great employees.

3. Aging Infrastructure

According to the American Road & Transportation Builders Association, around 36 percent of US bridges need repair or replacement. Many water systems are also aging, with some areas, like Jackson, Mississippi, experiencing water crises that leave their residents without safe drinking water for weeks. The US electrical grid, built in the 1960s and 1970s, has 70 percent of its transmission lines that are over 25 years old. Many of these have led to wildfires, which could worsen over time.

4. Employee Benefit Landscape

According to Deloitte, employer-sponsored health insurance plans cover roughly 154 million people in the United States, and costs have escalated for the third year in a row. Employers continue to seek affordable plans to encourage well-care and prevention. Additional benefits like accident and injury coverage, pet insurance, paid leave, reproductive health, and more continue to be popular offerings that are important to the workforce. Unsurprisingly, glucagon-like peptide-1 (GLP-1) drug coverage is now being offered by 1-in-3 employers. The highly effective weight loss drug could become more widely available with the potential to increase health equity.

5. Election Impact

Government regulations could be upended as the Trump administration has promised to reduce their impact. Last year's overturned Chevron deference ruling could potentially impact the Medicare set-aside industry, with its compliance rules based on a limited section of statutory language. Additionally, risk managers should continue to closely monitor domestic risks, such as the most recent terrorist attack on January 1, as well as rising geopolitical risks that could affect war risk exclusions.

6. EU Regulations Impacting US Companies

The European Union's Corporate Sustainability Reporting Directive aims to standardize sustainability information so companies can create comparable and reliable details for stakeholders. This environmental, social, and governance regulation applies to EU and non-EU companies, including public and private organizations. Implementation is staggered through 2029, with the first report submissions due in 2025. There are 3,000 US companies either exporting or doing business in the EU that must report, which is expected to grow to 10,000 US companies at full implementation and include 50,000 companies globally. Additionally, US companies need to understand compliance with the EU Artificial Intelligence (AI) Act, which uses a risk-based assessment to create more ethical AI, and the General Data Protection Regulation, which defines personal data usage.

7. Insurance Marketplace

Brokers and risk managers may be experiencing rate fatigue, but insurers face increased jury awards, property losses, and vehicle and property repairs. Until combined ratios return to profitable levels, rates will likely continue increasing. Parametric insurance, which insures a policyholder against a specific event by paying a set amount if the triggering event occurs, is becoming more popular for harder-to-insure properties. With no appraisals or valuation disputes, they are quick to settle. Finally, per- and polyfluoroalkyl substances (PFAS) claims are set to reach $80 billion in litigation costs, according to The Insurer TV. Reinsurers are beginning to exclude these claims, and these exclusions may eventually reach the primary coverage layer.

8. Evolving Technology and AI

From improving safety and loss control programs to forecasting financial trends related to accidents and claims development, risk managers are using AI to establish new protocols for their organizations. Their improved ability to understand real-time risks in the business is a value addition to operational and executive leaders. Payers are rapidly evolving claims processing, as this tech supports claims teams' productivity gains, improving operational consistency and quality performance. Other applications include claims triage, medical record and claims summarizations, reserve planning, fraud detection, and even virtual assistance for claims and clinical professionals.

9. Cyber

According to LexisNexis Risk Solutions, AI-assisted fraud schemes could cost over $1 trillion in the next year. Increased cyber attacks on US government agencies, private organizations, and infrastructure have led to significant losses, with many calling for a federal government backstop to protect from even larger attacks. With an average global cost of around $4.88 million, the challenges presented by cyber incidents remain a focus for risk managers and organizations alike.

10. Diversity, Equity, and Inclusion (DEI) Perspectives

With some US companies discontinuing DEI programming, groups should define their position. Inclusivity can be driven without a corporate stance, but employees want to feel respected and valued by their peers and leaders, which requires more transparent dialogue. Active job candidates will still search for DEI initiatives on company sites and social media to understand group policies and know they will be supported.

11. Labor Shortage Impact on Claims

Retail, restaurant, hospitality, and construction industries are still struggling to find workers. Employers are also trying to produce the same results with fewer employees, driving fatigue and overexertion among their workforces. Risk managers should monitor accident trends to note any correlation with staffing challenges. Employers should seek solutions for automating tasks, reducing strenuous activities, and monitoring unsafe practices.

12. Healthcare Landscape

Regulatory changes under the Trump administration could lead to more oversight of the Food and Drug Administration, with the Department of Health and Human Services focused on vaccine safety, pharmacy benefits managers, and drug approvals. Transformative technology continues to drive patient-centered care with expanded telehealth, virtual health assistants, and advanced care. Lastly, healthcare staffing and burnout are continuing to drive workforce challenges. This year, nursing is expected to reach a 10–20 percent staffing shortage necessary for direct patient care.

13. Exclusive Remedy in Workers Compensation

Most states have strict exceptions to workers compensation's exclusive remedy, which requires proving gross negligence or intentional acts. However, recent litigation in a couple of states has successfully circumvented these restrictions. In Virginia, lawsuits filed in two workplace shootings alleged the employer was negligent by not taking action to ensure a safe workplace. Last fall, the Pennsylvania Supreme Court ruled in Elite Care, RX, LLC v. Premier Comp. Sols., LLC, 318 A.3d 760 (Pa. 2024), allowing the healthcare providers to file a civil suit for nonpayment of bills. Finally, in November, an employee fired for fraud who sued in civil court for defamation was awarded a $34 million judgment.

14. Optimizing Your Risk Management Program

Risk managers are deploying in-house data analytics and AI modeling to improve safety and loss control and their understanding associated with enterprise risks. They are working diligently to integrate risk management into strategic decision-making across their organizations and partnering closely with their business partners to enable a risk-aware workforce. Evolving risks may require a nuanced approach to risk assessment and mitigation. In the wake of United Healthcare CEO Brian Thompson's assassination, organizations are rethinking public display and openness about the location of their executives and employees. Boardrooms across the United States—in the insurance industry or otherwise—are reflecting on this incident to improve their employee safety.

15. Biometric Privacy Laws

Unauthorized collection or disclosure of biometric information has led to several class action lawsuits, particularly in Illinois, but their statute was amended last year to limit damages on a per-person basis instead of per scan. Still, potential exposures are significant, with biometric privacy laws in Illinois, Texas, Washington, and New York City. Other states and municipalities are also considering similar legislation. Risk managers should monitor this evolving legislation and consult with counsel and other experts to ensure their policies with collections and use of biometric data follow statutes.

16. Achieving Operational Excellence

With the culmination of workplace technology advancements, newer workforces, increasing retirements, and outdated workflows and processes, now is the time for organizations to rethink how they drive performance. Identifying cross-functional teams to assess strengths, weaknesses, and actionable improvements in a company's operations, talent, and customer satisfaction may help drive meaningful changes to reach excellence in 2025.

17. Legal System Abuse

In 2023, jury awards over $10 million reached a 15-year record high, with 27 cases of over $100 million. This trend impacts every business and public entity, raising the costs of goods, services, and taxes for every American. Legal system abuse is driven by deceptive attorney advertising, anti-corporate sentiments, and the devaluation of money, but the solutions are systemic. Tort reform on judgment caps could help, but little progress has been made. Additionally, litigation funding needs extensive oversight, particularly as it threatens US national security. Chinese government-backed companies use litigation financing to pursue patent infringement claims against US technology and defense companies, not to prevail in litigation but to access trade secrets through the discovery process.

18. Managing through Mergers, Acquisitions, and Divestitures

HUB International's Outlook 2025 report noted that 45 percent of business leaders surveyed report planning or implementing strategies partnerships, 43 percent are planning or executing mergers and acquisitions activities, and 35 percent are planning international expansion. Risk managers preparing for these events should ensure their teams adequately understand these projects to identify, analyze, and mitigate potential risks. Consider the following items throughout the process: due diligence and deal intricacies, planning and executing integration, enterprise risk assessment, mapping regulatory compliance, broker partner and insurance reviews, understanding new and long-tail claims, and post-event operation models.

19. Workers Compensation Claims Trends

In the last 2 years, more states have revised fee schedules to catch up with the increasing costs of providing care, which, coupled with a growing shortage of medical providers, is likely to increase medical inflation. Catastrophic claims, while infrequent, are becoming increasingly expensive, with new medical technology and care, longer life expectancies, and higher rates of accident survivability.

Different generations in the workforce are also creating specific challenges. Workers aged 75 and older are the fastest-growing group in the workforce, quadrupling since 1964. When injured, this group experiences more severe injuries and recovers more slowly. However, increasing disability durations in the younger workforce are also trending upward.

While unclear, there is speculation that there is a greater valuation on work-life balance, so younger employees do not return until they are fully healed. Lastly, the industry should continue to monitor post-traumatic stress disorder presumption claims. Some states are expanding mental-mental claims to the entire workforce versus the first responders that initially benefited.

20. Navigating Headwinds

Macrofactors, whether economic, political, technological, or environmental, always impact businesses. In today's environment, it is not the cost of goods, competition, or regulation impacting us the most, but rather, the convergence of speed, complexity, and noise. Business decisions are expected to be made quickly, issues are more nuanced than ever, and demands are at every corner, with more stakeholders and communication methods. Getting the right answer is more difficult, but identifying and preparing for approaching risks is evolving organizational risk management.