CBIZ Sattler Adventure Sports Blog

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Ward, Hayden
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The 2024 Workers’ Compensation Outlook for Outfitters

Hunting Outfitter Guides

Workers’ compensation insurance has enjoyed sustained periods of market stability, supported by strong reserves and profitable underwriting results for nearly a decade. As a result, policyholders have benefitted from flat premium rates or modest rate decreases.

Industry experts caution that reserve redundancies, from reduced liability issues since the onset of the pandemic and increased market competition, could drive down underwriting profits in 2024. Most policyholders can anticipate another year of stable premiums or slight rate reductions.

The implementation of workplace safety measures and AI advancements have reduced employee injuries and associated workers’ comp claims. However, inflation, shifting workforce demographics and employee mental health challenges have raised some market concerns.

Trends Shaping the Workers’ Compensation Market in 2024

Changes to the Experience Modification Factor (EMF)

The  experience modification factor (EMF)  is critical in the calculation of workers’ compensation premiums. The  National Council on Compensation Insurance (NCCI), the regulatory body for the workers’ compensation system in 36 states, is making alterations to specific elements of its EMF formula for 2024. While the formula itself remains unchanged, adjustments in how certain foundational components are derived aim to reflect cost variations more accurately among states. Familiarize yourself with these changes to help prepare for potential premium adjustments.

Artificial Intelligence (AI) Solutions for Injury Prevention & Management

The implementation of AI technology presents an opportunity to prevent and address occupational injuries. According to industry data, AI has the potential to reduce workers’ compensation claim expenses by as much as 45%. By utilizing advanced imaging, scanning and data analysis, AI can quickly diagnose injuries, provide comprehensive insight into employee conditions and streamline claims management. Integrating AI with wearable devices and sensors enhances real-time monitoring, automates rehabilitation components and adjusts treatment plans based on workers’ recovery progress.

Employee Mental Health Challenges

The prevalence of  mental health concerns is increasing, with 20% of U.S. adults experiencing mental illnesses (e.g., anxiety, depression, post-traumatic stress disorder) each year. Failure to address moderate and severe mental health distress can heighten the likelihood of workplace accidents. These individuals may be less engaged or aware of potential safety hazards, resulting in poor decision-making. Consequently, these incidents contribute to higher workers’ compensation costs. Forty-one states have laws that address occupational mental health issues, and ongoing efforts at the federal and state levels will further enhance this coverage. However, there are differences in coverage and eligibility requirements across states. Some laws only provide benefits for mental health conditions related to specific industries or unexpected workplace incidents. Employees are responsible for proving their conditions are work-related to access coverage. This can be difficult, as mental health concerns are difficult to objectively measure. As a result, obtaining benefits might be challenging for some workers.

Shifting Workforce Demographics

Widespread  labor shortages  have compelled many organizations to hire inexperienced personnel. Additionally, there is a growing trend of older employees deferring retirement into their 70s. These developments have caused a shift in the overall demographic of the workforce, resulting in a larger portion of novice and aging employees. This alteration heightens occupational safety risks and workers’ compensation exposures. Industry data reports new employees are more susceptible to on-the-job incidents, with 34% of occupational injuries stemming from individuals who have held their positions for less than one year. As for older employees, although accounting for 13% of occupational injuries, they tend to sustain more severe injuries. With these employees accounting for a growing share of the labor market, employers are more likely to face exacerbated claim expenses.

Medical & Wage Inflation Issues in 2024

Workers’ compensation is significantly impacted by several types of inflation, including:

  • Medical: Health care resources, including physicians, supplies and pharmaceuticals, account for 60% of workers’ compensation costs. According to the NCCI, there has been a significant rise in medical costs within the workers’ comp sector. The Centers for Medicare and Medicaid Services has projected a 5.4% annual growth in health care spending until 2028, highlighting ongoing concerns regarding medical inflation.
  • Wage: Influenced by the cost of living, wage inflation has the potential to lead to higher rates. The average year-over-year wage increases ranged from 4.5% to 5.3% during 2021 to 2023, a significant increase from 2.6% in 2020. Since workers’ comp premiums are calculated based on payroll, wage inflation could result in higher premiums. The National Council on Compensation Insurance (NCCI) also noted that raises and higher-paying positions may lead to payroll miscalculations and temporary inconsistencies between wages, benefits and workers’ compensation premiums.

Strategic Tips for Adventure Sports Owners to Follow in 2024

  • Ensuring Accurate Payroll: Correct wage information is critical for conducting accurate premium calculations, especially amid rising inflation. Errors in payroll estimates could present profound consequences, including inadequate rates, insufficient benefits or a lack of ample coverage following costly claims.
  • Handling Claims: Have clear processes established  to manage your workers’ comp claims  diligently and efficiently. Effective claim management protocols can help mitigate claim severity and prevent future losses.
  • Safety & Health Programs: Address common risks, especially when using a loss-sensitive workers’ compensation program in your safety and health programs.
  • Routine Safety Training: Routinely administer safety training for employees of all ages and experience levels.
  • EMF Formula Changes: Stay informed of upcoming changes to NCCI’s experience modification factor formula. Consult with a trusted insurance advisor to understand the potential impact on your workers’ compensation premiums and develop strategies for improvement.
  • Wellness Initiatives: Implement workplace wellness programs designed to promote the prevention and management of chronic health conditions and enhance overall employee wellbeing. Incorporate mental health resources and support options in your  employee wellness offerings.
  • Monitoring Fee Schedules: Pay close attention to applicable state-regulated and carrier-negotiated fee schedules for your workers’ compensation coverage. Through fee schedules, employees can receive much-needed health care for work-related illnesses and injuries without significantly driving up claim costs.

Moving Forward

While the forces that determine your insurance rates may seem unmanageable, many of them are within your control. As an insurance buyer, it’s valuable to understand how your premiums are calculated, influential market trends and methods to get favorable pricing. Working on a solid plan and preparation can help you face the upcoming year and budget accordingly. Download the  CBIZ 2024 Property & Casualty Market Outlook  for further insights into this year’s predictions to help guide your business strategy. For additional risk management guidance and insurance solutions for your business,  request a free CBIZ Adventure Sport Insurance quote  today.

This blog may contain scenarios that are provided as examples only. Coverage is subject to the terms, conditions and exclusions of the policy issued. The information provided is general in nature and may be affected by changes in law or the interpretation of such laws. The reader is advised to contact a professional prior to taking any action based upon this information.

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CBIZ Sattler Adventure Sports Insurance, a division of CBIZ Insurance Services, Inc., is the largest insurer of adventure sports businesses in the United States. As part of an $850 million New York Stock Exchange traded company (CBZ), we developed a policy coverage to meet the needs for those in the recreation and outfitting industries. Our policy is underwritten by an A.M. Best Rated A++ (Superior) company.