The Big I Virginia Winter 2022-23

WINTER 2022-2023 

VIRGINIA 

THE MAGAZINE FOR INDEPENDENT INSURANCE AGENTS 

THE GREAT 

RESHUFFLE 

AND WORKERS 

COMPENSATION 

FREQUENCY 

ALSO INSIDE: 

THINGS YOU 

SHOULD 

KNOW ABOUT 

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WINTER 2022-23 

The Big I Virginia is a publication of the 

Independent Insurance Agents of Virginia 

8600 Mayland Drive, Richmond, VA 23294 

Phone: 804.747.9300 / Toll-free: 800.288.IIAV (4428) 

Fax: 804.747.6557 / E-mail: members@iiav.com / Website: iiav.com 

IIAV IS AN ORGANIZATION DEVOTED TO 

PROMOTING, ENHANCING, SERVING AND 

ASSISTING INDEPENDENT INSURANCE AGENTS. 

The Big “I” is a trademark owned by the Independent 

Insurance Agents & Brokers of America, Inc. (“IIABA”), and is 

being used with the permission of IIABA. 

INSIDE 

6 Message from the Chairman of the Board Mike Yergey 

8 Message from the President & CEO Robert N. Bradshaw Jr. 

11 Celebrating 125 Years 

12 Message from the State National Director Michael Funkhouser 

14 The Great Reshuffle and Workers Compensation Frequency 

24 IIAV Bids Farewell to Linda Loving 

25 Things You Should Know about the IIAV 

26 IRV Methodologies, Replacement Cost and Reconstruction Cost 

THANK YOU ADVERTISERS 

32 Applied Underwriters 

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8 Berkshire Hathaway 

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3 Builders Mutual Insurance 

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7 Harford Mutual 

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5 Iroquois Group 

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2 Jackson Sumner 

& Associates 

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For more information on advertising, contact Eric Johnson 

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414-708-2059 / fax: 414-354-5317 / eric@bluewaterpublishers.com 

10 Penn National 

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9 SIAA 

31 Summit Holdings 

summitholdings.com 

IIAV Staff 

Robert N. Bradshaw, Jr., MAM 

President & CEO 

rbradshaw@iiav.com 

Cell (804) 929-4134 

Teri Chester 

Executive Secretary/ 

Receptionist 

& Membership Coordinator 

tchester@iiav.com 

Joe Hudgins, CPCU 

Technical Consultant 

jhudgins@iiav.com 

Cell (804) 929-4138 

Bonnie Joyce 

Senior Insurance 

Administrative Assistant 

bjoyce@iiav.com 

Linda Loving, CIC, AISM, AIAO 

IIAV Chief Operating Officer 

& VFSC Executive Vice President 

lloving@iiav.com 

Cell (804) 929-4133 

Susan E. C. Perkins 

Membership/Education 

Coordinator 

sperkins@iiav.com 

Bonnie J. Warren, 

ACSR, CPIW, DAE, RPLU 

Insurance Account Executive 

bwarren@iiav.com 

Vera Wooden 


vwooden@iiav.com 

Donald W. Bragg, 

CPCU, CIC, CPIA, MBA 

Director of Membership 

& Marketing 

dbragg@iiav.com 

Melanie DeCola 


mdecola@iiav.com 

Debbi Little 

Director of Professional 

Development and Programs & 

Executive Director for VAIA 

(804)747-6557 

dlittle@iiav.com 

The Big I Virginia is a publication of the Independent Insurance Agents 

of Virginia and is published quarterly by Blue Water Publishers, LLC. The 

Independent Insurance Agents of Virginia, Inc. reserves the right in its sole 

discretion to reject advertising that does not meet IIAV qualifications or which 

may detract from its business, professional or ethical standards. IIAV and Blue 

Water Publishers, LLC do not necessarily endorse any of the companies 

advertising in the publication or the views of its writers. The publisher cannot 

assume responsibility for claims made by advertisers, content provided by 

the editor, or for the opinions expressed by contributing authors. 

4 THE BIG I VIRGINIA WINTER 2022-23

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2022-23 CHAIRMAN OF THE BOARD 

MICHAEL YERGEY 

Members@iiav.com 

CELEBRATING THE PAST & COMMITTEE TO THE FUTURE 

Yes, IIAV is celebrating our 125th anniversary 

from our founding in 1898. Few organizations 

survive that long and few have maintained their 

relevance for that long. The political, educational and 

informational needs of independent agents have not only 

been maintained over the years but some would argue 

have become more critical to the successful and efficient 

agency of today. That is certainly more of a reality in these 

days of cyber liability insurance. 

The IIAV convention — June 25-27 — will celebrate this 

progress while also laying the foundation for the challenges 

of the future. First and foremost we will hear from Crystal 

Washington a futurist — as our keynote opening speaker 

who will lay the foundation for the convention to come. 

Our secondary keynote speaker — Doug Smith with Erie 

— will present the future trends more specifically to the 

insurance industry. And Jon Jensen — IIABA Chairman 

for 2019-20 — Will outline what he sees as the future of 

the independent agent. Jon is President of the Correll 

Insurance Group in Spartanburg, South Carolina, one 

of the premier independent insurance agencies in the 

Southeast. 

The convention will have a number of informational breakout 

sessions dealing with the issues of the day and for the 

tradeshow, will allow you to transition from one decade to 

another adding some fun and levity to the convention event. 

Why should you attend? 

• Networking among your peers. 

• Industry updates such as the annual state of the 

industry from Insurance Commissioner Scott White. 

• A massive trade show with networking among our 

company partners. 

• And simply put, fun at the beach — 

make it a family affair. 

• Expand your knowledge, learn and 

improve. 

• Hear directly from successful agencies 

• And much more. 

I don’t believe I’ve ever attended 

a convention where I didn’t meet 

someone new and learn about 

the successful operations of other 

agencies. 

In the coming months, you’ll hear 

more about the IIAV convention which 

will again be located at the Virginia 

Beach Oceanfront Marriott — just an 

absolutely beautiful location. I’d love 

to meet you there and if you have any 

questions about the convention, don’t 

hesitate to contact me at members@ 

iiav.com. 

Remember, Celebrating the Past 

& Committed to the Future … IIAV 

125 years of progress. IIAV is YOUR 

association, I look forward to seeing 

you there. 


Harford Mutual 

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PRESIDENT & CEO 

ROBERT N. 

BRADSHAW, JR., MAM 

rbradshaw@iiav.com 

IT IS A POLITICAL THING … AND A RELATIONSHIP THING 

When I first joined the staff at IIAV — after over 

20 years in D.C. — I asked the membership 

if they knew or had contacts with any of the 

legislators … and if they did, to please introduce me to 

them. Bill Ball an agent in Richmond introduced me to 

Sen. John Chichester who was at the time President Pro- 

Temp and Finance Committee Chair of the Senate. Next 

to the House Leader, Sen. Chichester was one of the most 

important people in the Legislature. I recall going to meet 

the senator at his office and he was engaged in a rather 

angry conversation on the phone with the governor at the 

time. I was a little taken aback but when the senator hung 

up the phone, his demeanor changed dramatically and he 

welcomed me to Richmond. The three of us discussed the 

insurance industry for a little while and before we closed 

our meeting, Sen. Chichester told me that he would NOT 

carry any legislation for me. Because of his position, and 

many demands for quid-pro-quo voting, that he didn’t 

want to be put in an unethical position. Further, because 

of his involvement in the insurance industry, he would 

likely recuse himself from any legislation that might have a 

conflict of interest. That said, he did offer to help with any 

legislative background or guidance that I needed and to 

stay in touch. 

Continued on page 10 >> 

Thank you for your business & Happy New Year. 


WINTER 2022-23 THE BIG I VIRGINIA 11

STATE NATIONAL DIRECTOR 

MICHAEL F. FUNKHOUSER 

mike@haunm.net 

I AM A TRUSTED CHOICE AGENT. WHAT NOW? 

Did you know that your Association membership 

automatically makes you a Trusted Choice Insurance 

Agent? Let’s discuss what that means, and how it can help 

you to effectively brand and market your agency. 

The Trusted Choice website, trustedchoice. 

independentagent.com, states that “Trusted Choice is a 

co-brand designed to complement the local marketing 

efforts of independent agents, extend their reach, and 

drive more consumers to independent agencies.” Sounds 

great, right? The tools are provided on the website for 

“one stop shopping” and since the tools are a benefit of 

membership, there are no charges! 

The goal is to educate consumers on the value of 

Independent Agents while providing you with marketing 

resources to connect with consumers and be a part of the 

collective brand. 

What can Trusted Choice provide you? 

Content to Share: Graphics, infographics, videos, and 

articles to share on social media or your website. Much 

of the information is simply copy and paste to whatever 

platform you want to use. There are hundreds of messages 

to choose from and a variety of subjects depending on 

who you are targeting. There is also a “Content Calendar” 

to help plan your social media posts with this ready to use 

content. 

Marketing Campaigns: Print ads, digital ads, and videos 

to complement your efforts. Select from a variety of 

consumer-tested, customizable advertising campaigns 

you can use to highlight your agency’s unique value. 

Programs and Services: 

• Marketing Reimbursement – All members 

are eligible for reimbursement of 50% of cost 

(maximum $750) for co-branded marketing efforts. 

Co-branding is defined as supplementing your 

agency’s own branding with the Trusted Choice 

logo. This can be in traditional (print ads, flyers, 

signage, billboards) or digital (online, apps, social 

media, TV) platforms. 

• Website upgrade – Upgrade your web presence by 

using one of Trusted Choice’s vetted vendors to build 

your agency a new webpage, and receive a $500 

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• Free Digital review – A complete analysis of your 

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By Authors Names Here 

THE GREAT RESHUFFLE 

The Great Reshuffle AND and Workers WORKERS Compensation Frequency 

COMPENSATION FREQUENCY 

Key Findings 

By Patrick Coate 

• The Great Reshuffle led to a modest increase in the share of short-tenured workers, a few percentage 

points in most sectors 

KEY • FINDINGS 

Short-tenured workers in most sectors are close to twice as likely to suffer work injuries than fulltenured 

Great Reshuffle workers, led but to their a modest relative increase risk is in lower the in in-person almost 10 million service more sectors than pre-pandemic averages. Many 

• The 

share of short-tenured workers, a few percentage workers are new to their jobs. Some of these are moving 

• The explosion of remote work during the pandemic put downward pressure on injury frequency, 

points in most sectors 

from one similar job to another, but others are changing 

especially in office-based sectors 

• Short-tenured workers in most sectors are close to 

industries or occupations. At the same time, there are a 

• The net impact on frequency across multiple sectors, 

twice as likely to suffer work injuries than full- tenured 

large like number a state of or new book remote of business, workers. will Many vary people based on left 

the office at COVID’s onset; there has been a trickle back, 

workers, the changes but their in relative industry risk mix is and lower the in frequency in-person metric 

• representing a massive change in the amount of remote 

service The sectors Great Reshuffle may have contributed to frequency anomalies in 2020 and 2021, but it is likely to 

work compared to before the pandemic. 

• The cause explosion only of small remote deviations work during from the frequency pandemic trends in the coming years 

How do such large changes in the labor market impact 

put downward pressure on injury frequency, especially 

workers compensation injury frequency? The magnitude 

in office-based sectors 

of these impacts relies on the interaction of three factors: 

• The net impact on frequency across multiple sectors, 

like a state or book of business, will vary based on the 

changes in industry mix and the frequency metric 

• The Great Reshuffle may have contributed to 

frequency anomalies in 2020 and 2021, but it is likely 

to cause only small deviations from frequency trends 

in the coming years 

INTRODUCTION 

The Great Reshuffle is reshaping the US labor market. 

Unemployment is historically low, but labor force 

participation is still lower than the pre-pandemic rate. 

Labor shortages have led to wage growth, especially 

strong among low-wage workers and in sectors like Leisure 

and Hospitality. 

Quit rates jumped in the middle of 2021 and remain high 

at the time of this writing—about 50 million quits a year, 

September 2022 

By Patrick Coate 

• How much more or less likely are short-tenured or 

remote workers to be injured than other workers? 

• How much has the share of such workers changed? 

• How has the sector mix of the workforce changed 

during the pandemic? 

SHORT–TENURED WORKERS 

How many short-tenured workers are there? 

The first question to answer is how many short-tenured 

workers are there in the labor market and in each sector? 

In the chart below, we show estimates of the share of 

short-tenured workers (12 months or less with their current 

employer) for the years immediately preceding the 

pandemic. Two observations stand out. 

First, there were a lot of short-tenured workers in all sectors, 

even before the pandemic. Since 2012, the average share 

© Copyright 2022 National Council on Compensation Insurance, Inc. All Rights Reserved. 

© 

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Copyright 

RESEARCH 

2022 

ARTICLES 

National 

AND 

Council 

CONTENT 

on Compensation 

DISTRIBUTED 

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BY NCCI ARE 

Inc. 

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Reserved. 

GENERAL INFORMATIONAL PURPOSES ONLY AND ARE PROVIDED “AS 

IS.” NCCI DOES NOT GUARANTEE THEIR ACCURACY OR COMPLETENESS NOR DOES NCCI ASSUME ANY LIABILITY THAT MAY RESULT IN YOUR RELIANCE UPON 

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14 THE IMPLIED BIG WARRANTIES I VIRGINIA INCLUDING WINTER THE 2022-23 IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

Introduction 

The Great Reshuffle is reshaping the US labor market. Unemployment is historically low, but labor force 

participation is still lower than the pre-pandemic rate. Labor shortages have led to wage growth, especially 

strong among low-wage workers and in sectors like Leisure and Hospitality. 

Quit rates jumped in the middle of 2021 and remain high at the time of this writing—about 50 million quits a 

year, almost 10 million more than pre-pandemic averages. Many workers are new to their jobs. Some of these 

are moving from one similar job to another, but others are changing industries or occupations. At the same 

time, there are a large number of new remote workers. Many people left the office at COVID’s onset; there has 

been a trickle back, representing a massive change in the amount of remote work compared to before the 

pandemic. 

of short-tenured workers across all sectors has consistently Manufacturing subsectors responded to lower labor 

been How between do such 21–23%. large changes This is not in the a historical labor market anomaly— impact demand workers compensation in 2020 by reducing injury frequency? hours and The enacting magnitude 

the of short-tenured these impacts share relies was on even the higher interaction the of late three 1990s factors: temporary plant shutdowns. 2 Cutbacks in work hours 

and early 2000s before the Great Recession. 1 In other reduced layoffs. Consequently, manufacturing firms met 

words, there • How is always much a more substantial or less share likely of are workers short-tenured who recovering or remote labor workers demand to be in injured part by than restoring other work workers? hours 

are new • on the How job. much has the share of such workers changed? rather than new hiring. 

Second, • the How share has of the short-tenured sector mix workers of the workforce varies widely changed We during estimate the the pandemic? change in the share of short-tenured 

by sector, but all sectors have a substantial share of shorttenured 

workers in any given year. Leisure and Hospitality sources. The Current Population Survey (CPS) conducts 

workers during 2021 using a combination of two data 

has the highest share of short-tenured workers, at nearly a biennial survey supplement on employee tenure in 

40% in the years prior to the pandemic. Retail Trade, around January of even years. However, the latest published report 

30%, also has a high share of short- tenured workers. Even contains data from January 2020, predating the onset of 

in sectors with the lowest shares of short-tenured workers, the pandemic. 3 Thus, we estimate more recent shares of 

Manufacturing, Wholesale Trade, and Financial Activities, short-tenured workers using the Job Openings and Labor 

about 18% of workers are in the first year at their employer. Turnover Survey (JOLTS). 

What happened during the pandemic 

and recovery? 

We estimate that the share of short-tenured workers 

increased modestly in 2021. The share of short-tenured 

workers in Leisure and Hospitality increased from 41% to 

48%; in Retail Trade from 30% to 33%; and in Transportation 

and Warehousing, from 24% to 27%. 

We estimate smaller changes—or even no change— 

in sectors where hiring rates did not change much—in 

late 2020 and during 2021—from pre-pandemic norms. 

These sectors include Professional and Business Services, 

Financial Activities, Information, Manufacturing, and 

Wholesale Trade. 

The first three of these sectors require relatively little inperson 

contact with customers and are conducive to 

remote work, as we will discuss further in the next section. 

These sectors suffered fewer job losses than average at the 

pandemic’s onset and less reshuffling of workers during 

the recovery. 

The latter two sectors have relatively high shares of longtenured 

workers and experienced less turnover. Some 

By our definition, short-tenured workers are those who 

were hired at their current employer in the last 12 months. 

Therefore, we can get a very good estimate of shorttenured 

worker share by using average JOLTS hiring 

rates by sector (new hires/total workers) for the trailing 12 

months. Although some new hires will change jobs again 

or leave the workforce before serving a full year on the 

job, prior 12-month hiring rate correlates very strongly 

in all sectors with the share of short-tenured workers as 

measured by the CPS supplement. 

Examining the JOLTS data can illuminate why we estimate 

only a modest increase in short-tenured workers. 

• Private industry hire rates were between 4.0-4.4% every 

month for over five years before the pandemic’s onset. 

• After a dip and subsequent spike in the second quarter 

of 2020, during the initial phase of the COVID-19 

pandemic, hire rates have steadily been 4.4-5.0% every 

month from July 2020 through June 2022. 

• Hiring rates have thus increased between 10-15% 

during the Great Reshuffle, with some variation by 

sector as reflected in our estimates shown above. 


There were over 65 million new hires in 2019, so this increase an important concept regarding our method. Our relative 

is large 

Introduction 

in absolute terms, but it led to a modest increase in risk measure is a combination of two components: 

the share of short-tenured workers in 2021. Because hiring 

The Great Reshuffle is reshaping the US labor market. Unemployment • How much more is historically likely a short-tenured low, but labor worker force to be 

rates in the first half of 2022 are very close to the 2021 

average, participation we estimate is still the lower overall than share the pre-pandemic of short-tenured rate. Labor injured shortages than have a full-tenured led to wage worker growth, while especially performing 

the same task 

workers strong in 2022 among to date low-wage remains workers elevated and near in sectors 2021 levels. like Leisure and Hospitality. 

• How hazardous are short-tenured workers’ versus fulltenured 

the time workers’ of this average writing—about job tasks 50 million quits a 

What Quit is rates the jumped relative in injury the middle risk of for 2021 and remain high at 

short-tenured year, almost 10 workers? million more than pre-pandemic averages. For Many in-person workers service are sectors, new to their full-tenured jobs. Some workers of these are 

To measure are moving the effect from one of an similar influx of job short-tenured to another, workers but others usually are changing doing similar industries tasks or (or occupations. least similarly At the hazardous same 

on time, frequency, there we are must a large know number not only of new how remote many more workers. tasks) Many to people short-tenured left the office workers. at COVID’s For example, onset; nurses there in has 

short-tenured been a trickle workers back, there representing are, but also a massive how much change more in the hospitals amount and of nursing remote homes work compared and sales associates to before in the retail 

likely they are to sustain a workplace injury. Thus, we next stores typically perform similar job tasks at both short and 

pandemic. 

estimate the relative injury risk of short-tenured workers full tenure. 

and How full-tenured do such 4 workers. large changes in the labor market impact Conversely, workers compensation two sectors stand injury out frequency? in this chart The for magnitude having 

This of estimation these impacts uses two relies data on sources. the interaction of three factors: very atypical relative risks. These are sectors which have an 

• Historical estimates of short-tenured worker shares especially strong relationship between worker tenure and 

taken • from How the much CPS more supplement or less likely on worker are short-tenured tenure work remote tasks typically workers performed to be injured by short- than other tenured workers? versus 

discussed • How in the much last has section. the share of such workers changed? full-tenured workers. 

• Annual • How estimates has the by sector mix of the of the share workforce of injured changed In Wholesale during the Trade, pandemic? short-tenured workers are nearly 

workers who have less than one year of tenure, 

published by the Bureau of Labor Statistics’ Survey of 

Occupational Injuries and Illnesses (SOII). 5 

These data allow us to estimate how much more (or less) 

likely a short-tenured worker is to be injured than a fulltenured 

worker, assuming the two work similar number of 

work hours.6 The results are shown below. 

Short-tenured workers have a much higher injury frequency 

than their full-tenured counterparts, approximately twice 

as high or more in most sectors. Short-tenured workers’ 

comparative injury frequency is not quite as high in several 

major in-person service sectors, including Leisure and 

Hospitality, Health Care and Social Assistance, and Retail 

Trade. Since these are on a full-time equivalent worker 

(FTE) basis, these relative risks assume the same number 

of hours worked per employee. 

The difference in relative risks between sectors illustrates 

16 THE BIG I VIRGINIA WINTER 2022-23 

three times more likely to suffer injury than full-tenured 

workers. This is strongly related to occupation. The two 

most common occupations within Wholesale Trade are 

salespersons and freight and stock movers. Sales activities 

in Wholesale Trade often require a lot of sector- specific 

knowledge, thus sales staff in the sector tend to be fulltenured.7 

Movers in Wholesale Trade are more likely to be 

short-tenured and have more physically demanding and 

hazardous jobs than the higher-tenured salespersons. 

Information is the only sector in which short-tenured 

workers are less likely to suffer injuries than full-tenured 

workers. Here, the relationship between tenure and 

hazardous occupations, so pronounced in Wholesale 

Trade, is reversed. 

Information is a mixture of disparate subsectors including 

publishing, motion pictures, data processing and hosting, 

and telecommunications. Among these subsectors, 

telecommunication workers—including equipment repairers 

and telecom line installers—have the highest median tenure 

and the highest share of hazardous occupations. 

Our relative risk measure comes with two caveats. First, the 

short-tenured share of injuries versus employment come 

from different sources, so there is potential for mismatch 

between the datasets. Second, there is no way to adjust 

for the fact that short-tenured workers within a sector often 

have different job tasks than full-tenured workers. Our 

result represents a combination of differences in injury rate 

for differing job duties (for workers of a similar tenure), as 

well as the tenure-driven differences in actual likelihood of 

injury for the same tasks.

Despite these limitations, these estimates are useful for this figure excludes those who already worked from home. 

getting 

Introduction 

a sense of how much an increase in short- tenured 

Remote worker share pulled back in 2021 to an average of 

workers may affect frequency. In sectors where shorttenured 

workers are twice as likely to be injured as full- 

The Great Reshuffle is reshaping the US labor market. Unemployment 16% across all sectors. is historically At the low, pandemic’s but labor onset, force virtually 

tenured participation workers, a is percentage still lower than point the increase pre-pandemic in the share rate. Labor anything shortages that could have be led done to remotely wage growth, was done especially remotely. 

As the initial wave of the pandemic passed, and especially 

of short-tenured strong among workers low-wage should workers be associated and in sectors with about like Leisure and Hospitality. 

once vaccines were introduced, workplaces began to 

a percentage point increase in the incidence rates. Any 

effect Quit will rates likely jumped be smaller in the for middle in-person of 2021 service and sectors, remain high reopen. at the time of this writing—about 50 million quits a 

especially year, almost Leisure 10 and million Hospitality, more than where pre-pandemic the historical averages. While Many the share workers of remote are new workers to their increased jobs. Some everywhere of these 

relative are moving injury risk from is much one lower similar than job 100%. to another, but others in are 2020, changing the largest industries concentration or occupations. was unsurprisingly At the same in 

office-based sectors. These sectors are most amenable to 


REMOTE WORKERS 

working from home. The graph above shows estimated 

been a trickle back, representing a massive change in the shares amount of remote of remote workers work using compared sector-level to before data for the both 

How pandemic. many remote workers are there? 

pre-pandemic shares of remote work and pandemicrelated 

remote work in 2020 and 2021. The greatest and 

The story for remote workers is much different than that 

for How short-tenured do such large workers. changes Short-tenured in the labor workers market have impact most workers lasting compensation increases came injury in Professional frequency? The and magnitude 

Business 

always of these accounted impacts for relies a substantial on the interaction portion of of the three labor factors: Services, Financial Activities, and Information. Nearly all 

force and the Great Reshuffle only moderately increased of these workers fall into the Office and Clerical workers 

their share. • How But the much share more of or remote less likely workers are short-tenured exploded compensation or remote workers class codes. to be injured than other workers? 

during the • pandemic. How much has the share of such workers changed? 

Even these large increases in remote workers due to the 

Before the • pandemic, How has the only sector about mix 6% of of the workers workforce worked changed pandemic during are the conservative pandemic? estimates of the total changes 

primarily from home. 8 During the pandemic, this in 2020 and 2021. The question from the CPS survey used 

percentage grew dramatically. An average of 26% of to create them asks whether an employee worked remotely 

people employed across all sectors worked from home due to the pandemic. This share will decline as workers 

because of the pandemic in April–December 2020 9 and return to reopened offices and other worksites. But it may 

also decline if employers adopt a more permanent workfrom-home 

arrangement. 

Respondents could still work remotely, but no longer 

consider the decision tied to the pandemic. 

The estimated share of remote workers can vary by 

survey depending on the exact definitions used, but the 

general picture that the pandemic supercharged remote 

work is clear: 

• A Pew report from a survey conducted in January 

2022 concluded that among those whose job 

responsibilities can largely be done from home, 59% 

of workers primarily work remotely; but only 40% of 

Americans have such jobs. 10 

º This suggests about a quarter of Americans (59% x 

40%) still work remotely, only a little higher than the 

22% we estimate for 2021 (16% new remote workers 

due to the pandemic plus 6% already working from 

home pre-pandemic). 

• A Gallup survey reported that 25% of full-time workers 

worked entirely from home as of September 2021 and a 

further 20% worked from home at least 10% of the time. 11 

º The total of 45% is higher than the other survey 

results, but the Gallup survey includes all hybridremote 

and in-person workers and excludes parttime 

workers. 12 


We use the estimates from the CPS for two reasons. First, Code 8871 accounts for only 1% of payroll and 0.4% of 

we 

Introduction 

would like to interpret the share of remote workers on a premium within the Office and Clerical industry group in 

full-time equivalent basis. But what we can easily measure Policy Year 2018, as many telecommuters are not eligible 


is the share of workers who do at least some of their for this classification. 

work participation remotely. The is still CPS lower and than Pew the survey’s pre-pandemic conservative rate. Labor shortages have led to wage growth, especially 

While neither of these measures are perfect, they indicate 

estimates strong of among remote low-wage workers workers likely reflect and in more sectors workers like Leisure and Hospitality. 

that the relative risk for remote workers is lower than for 

who are fully or primarily remote. Using more expansive 

estimates, Quit rates like jumped Gallup’s, in that the include middle more of 2021 hybrid and workers, remain high on-site at the workers time of and this that writing—about the differential 50 million in relative quits risk a 

between remote and on-site workers is smaller than that 

without year, distinguishing almost 10 million primary more versus than occasional pre-pandemic remote averages. Many workers are new to their jobs. Some of these 

between short-tenured and full-tenured workers. 

workers, are moving could lead from us one to overstate similar job the to amount another, of remote but others are changing industries or occupations. At the same 

work time, being there done. are a large number of new remote workers. SCENARIO Many people left ANALYSIS: the office at COVID’s FREQUENCY onset; there has 

The been second a trickle reason back, is practical. representing The CPS a data massive has excellent change in the IMPACTS amount of BY remote SECTOR work compared to before the 

data pandemic. detail by sector. As with short-tenured workers, 

What is the net frequency effect of these combined 

variation in the amount of remote work being done in 

changes? And what will the pressures on frequency be as 

different How do sectors such is large important changes to understanding the labor market the degree impact 

the 

workers 

share 

compensation 

of short-tenured 

injury 

and remote 

frequency? 

workers 

The 

continues 

magnitude 

to which of these incidence impacts rates relies in on each the sector interaction are likely of three to be factors: 

evolve? To illustrate these impacts, we present several 

affected. 

frequency scenarios for selected sectors. 

• How much more or less likely are short-tenured or remote workers to be injured than other workers? 

What is the relative injury risk 

In each sector, we estimate two long-term frequency 

for remote • How workers? much has the share of such workers changed? 

trends with data from 2011–2020. In these scenarios, we 

• How has the sector mix of the workforce changed 

Because remote work was rare until recently, there is very use during BLS incidence the pandemic? rates as our frequency measure, defined 

little direct data about the injury frequency of remote workers as the number of injury and illness cases requiring days 

versus on-site workers. However, for scenario analysis, we away from work per 10,000 FTE workers. We will discuss 

must make some estimate of the relative risk of remote other frequency metrics in the subsequent section about 

versus on-site workers. In this report, we select an estimate changes in the mix of workers. 

of –20% in every sector, meaning fully remote workers have 

20% fewer injuries than comparable on-site workers. 

This was selected judgmentally based on two sources. 

The first is SOII incidence rate data by sector for the years 

2011 to 2020. We use this sector-level data to estimate the 

relationship between the change in injury frequency and 

the change in the share of short-tenured workers and the 

share of remote workers, as well as a sector- specific longterm 

trend. The results generated a plausible range of 

relative risks between about –15% and –30%. Our selection 

of –20% is within this range. 

Remote work was uncommon before the pandemic. 

Consequently, most of the variation observed in remote work 

occurred in 2020. As 2020 was a very unusual year in many 

respects, the estimated range may change with future years 

of data. For this reason, we look for corroborating evidence 

that the selection of –20% is reasonable more generally. 

NCCI data on loss experience of pre-pandemic remote 

workers was also analyzed in making the –20% selection. 

Previous NCCI research, based on limited data, has 

shown that clerical telecommuting workers (Class Code 

8871) have lower average loss costs than clerical office 

employees (Class Code 8810), $0.05 to $0.07. 13 The 

magnitude of this reduction aligns with our –20% estimate. 

However, this simple comparison has obvious limitations, 

most notably, the small size of losses and exposure. Class 


Injury rates have been declining for decades. Any impact 

of short-tenured or remote workers on injury rates should 

be measured relative to this long-term trend. Therefore, 

we first estimate a pure time trend model. Second, we use 

all the information discussed in this report—the estimated 

historical share of short-tenured and remote workers, 

along with the estimated relative risks of such workers—to 

estimate a long-term frequency trend net of fluctuations in 

the share of short-tenured and remote workers. 

Using the latter method, we then consider two plausible 

paths for the evolving share of short-tenured or remote 

workers through 2025. We then plot the implied incidence 

rates along these two illustrative paths, as well as the path 

of incidence rates we estimate from the long-term trend 

that ignores these impacts. 

In all cases we use actual BLS incidence rates through 2020 

(excluding days away from work cases due to COVID- 19) 14 

and apply the model estimate for 2021 through 2025. We 

show paths for Leisure and Hospitality, Transportation and 

Warehousing, and Professional and Business Services to 

demonstrate the importance to frequency change of the 

various factors in our analysis. 

Leisure and Hospitality 

Leisure and Hospitality scenarios are shown in the figure 

below. Incidence rates for Leisure and Hospitality workers

fell sharply in 2020; a return to the long-term trendline (the matter, but not nearly enough to overwhelm Leisure and 

black Introduction 

dashed line) would result in an increase from 2020 Hospitality’s long-term trend. 

to 2021. Even so, the estimated 2021 incidence rate of 

The Great Reshuffle is reshaping the US labor market. Unemployment 

about 72 cases per 10,000 FTE workers would be below Transportation is historically and Warehousing low, but labor force 

pre-pandemic participation levels. is still lower than the pre-pandemic rate. Labor shortages have led to wage growth, especially 

Short-tenured workers are more impactful to Transportation 

strong among low-wage workers and in sectors like Leisure 

For 2021 and beyond, we consider two scenarios: 

and Warehousing and Hospitality. frequency than Leisure and Hospitality, 

since in this sector such workers are about twice as likely 

• Quit Orange: rates The jumped share in of the short-tenured middle of 2021 workers and remain the high at the time of this writing—about 50 million quits a 

to suffer a workplace injury than full- tenured workers. And 

year, sector almost remains 10 at million the 2021 more level than of 48% pre-pandemic through 2025averages. while Many the 2021 workers increase are new in short-tenured to their jobs. worker Some share of these in 

• are Blue: moving The share from of one short-tenured similar job to workers another, drops but by others 5 this are sector changing was industries not as large or as occupations. in Leisure and At Hospitality, the same it 

time, percentage there points are a in large 2022 number and 2023 of and new by one remote additional workers. was Many still people significant. left the office at COVID’s onset; there has 

been point a in trickle 2024 and back, 2025, representing dropping to 36% a massive by 2025change in the Furthermore, amount of Transportation remote work compared and Warehousing to before has the much 

pandemic. 

higher incidence rates than Leisure and Hospitality, so even 

a similar change in relative risk will have a larger effect on 

How do such large changes in the labor market impact the workers total number compensation of injuries. injury frequency? The magnitude 


Here, our illustrative scenarios are different: 

• How much more or less likely are short-tenured or • Orange: remote workers We assume to be the injured share than of other short-tenured workers? 

• How much has the share of such workers changed? workers in the sector remains at the 2021 level of 27% 

through 2025. 

• How has the sector mix of the workforce changed during the pandemic? 

• Blue: We assume that the share of short-tenured 

workers grows by two percentage points in 2022 and 

2023 before leveling off in 2024 and 2025. 

In both scenarios, the estimated 2021 incidence rate is 

above the pure trend estimate. This is because the pure 

trend model does not incorporate short-tenured and 

remote worker shares at all, but the orange and blue 

scenarios do. Both scenarios show an uptick in 2021 

frequency due to the spike in short-tenured workers. 15 

They diverge in later years. 

In the orange scenario, frequency declines roughly in 

parallel with the pure trend estimate. However, the 

frequency remains above the pure trend model because 

the short-tenured share stays high through 2025. In the 

blue scenario, the share of short-tenured workers declines 

over time, reducing expected frequency. Eventually, the 

benefit of remote work on injury rates becomes the bigger 

of the two impacts. 

Despite significant differences in assumptions, the orange 

and blue scenario outcomes are not too different. This 

follows from our estimate of relative risk. Short-tenured 

workers in Leisure and Hospitality are about one-third 

more likely to get injured than full-tenured workers, much 

less than most sectors. Even the dramatic 2021 change in 

short-tenured workers was only about 8 percentage points, 

and year-over-year scenario changes are much smaller 

than that. Scenario changes in short-tenured worker shares 

The orange scenario is the same as for Leisure and 

Hospitality: short-tenured share holds steady at 2021 

rates. But Transportation and Warehousing was a growing 

sector pre-pandemic and was in fact one of the only 

sectors whose share of short-tenured workers had been 

rising even before 2021. Thus, the blue scenario illustrates 

continued increases in short-tenured worker share. In both 

scenarios, higher shares of short-tenured workers lead to 

higher expected frequency than would be indicated by the 

pure trend model.16 In the scenario where Transportation 

and Warehousing’s short-tenured worker share continues 

to rise through 2023, incidence rates are much higher and 

do not fall back to the 2020 low until 2025. 


Professional and Business Services 

Frequency Impacts of Worker Mix Changes 

The Introduction 

pandemic’s main effect on Professional and Business The discussion thus far has focused on the share of shorttenured 

and remote is historically workers by low, sector but labor and their force relative 

Services The Great was a Reshuffle dramatic rise reshaping remote work. the US Our labor scenarios market. Unemployment 

for participation this sector focus is still on lower changes than in the pre-pandemic share of remote rate. Labor risks. But shortages another have effect led of to the wage pandemic growth, was especially a change in 

workers 

strong 

rather 

among 

than 

low-wage 

the share of 

workers 

short-tenured 

and in sectors 

workers. 

like Leisure the mix and of Hospitality. business. What net frequency effect would we 

As we have shown, the share of remote work expanded expect to see from all three types of change together— 

rapidly Quit in rates 2020 jumped due to in the the pandemic. middle of 2021 While and the remain share high share at the of short-tenured time of this writing—about workers, share of 50 remote million workers, quits a 

partially year, receded almost 10 in 2021, million it more remained than dramatically pre-pandemic higher averages. and changing Many workers industry are mix—at new to an their aggregated jobs. Some level of for these an 

than pre-pandemic. It is not clear what to expect going entire state or representative book of business? 


forward, time, as there some are companies a large number push for of a return new remote to the office workers. The Many first people two effects left the act office in opposite at COVID’s directions. onset; Upward there has 

and others have made flexible or fully- remote options pressure on frequency from more short-tenured workers 


permanent. Our scenarios allow for the possibility that is partially balanced by the downward pressure from 

remote pandemic. work share may move in either direction in the next more remote work. While the magnitude of each of these 

few years. 

How do such large changes in the labor market impact 

effects 

workers 

depends 

compensation 

on the mix 

injury 

of 

frequency? 

business, most 

The 

states 

magnitude 

will 

• Orange: The share of remote workers increases from have similar effects because the industry mix of the labor 


42% in 2021 to 54% in 2023, which was the 2020 high market is similar in most states. 17 For insurance carriers, 

in remote • How worker much share, more or and less stays likely at are that short-tenured level in either 

or remote 

effect may 

workers 

dominate 

to be 

if 

injured 

they primarily 

than other 

write 

workers? 

policies 

subsequent years. 

in certain sectors of the economy. 


• Blue: The share of remote workers continues its 2021 But what is the frequency effect from the change in mix 


decline each year through 2025, although never falling itself? We can break this question down into two parts. 

all the way back to pre-pandemic levels. 

How did the mix change? And what is the frequency metric 

being used? 18 

As in the case of Leisure and Hospitality, differences in 

incidence rates are modest. The orange scenario has 

about 28 cases per 10,000 FTE workers by 2025, compared 

to 30 per 10,000 FTE workers in the blue Scenario. Two 

scenario paths bracket the path for the pure trend model, 

suggesting that trends in incidence rates for office and 

clerical workers depend on how many such workers return 

to on-site work. This industry group accounts for 60% of 

workers compensation payroll and 11% of premium. 

These scenario effects depend on our working estimate of 

a –20% relative risk for remote workers, which is subject to 

refinement as we learn more about remote work, and as 

workers and the workers compensation system adapt to 

the increased prevalence of the home office. 


To illustrate why the choice of metric is important, consider 

the example of roofers. Because roofing is more hazardous 

than most jobs, it has high injury frequency measured 

per worker or per payroll. Average injuries are also more 

severe. Workers compensation losses are determined by 

the likelihood of injury and the average severity: it takes 

a smaller number of high-severity injuries to generate 

the same amount of losses. Loss costs are a component 

used to determine final premium rates. Thus, high-severity 

classes have lower frequency per premium than lowseverity 

classes, even classes such as roofing that have 

high frequency per payroll. 

Both the magnitude and the direction of the mix effect 

on frequency during the pandemic differ depending on 

these considerations. To demonstrate this, we use 2019 to 

2021 employment changes by sector for two sample states 

and show the estimated effects of changes to the share of 

short-tenured workers, the share of remote workers, and 

industry mix on frequency per premium and per payroll. 

This graph shows the two states’ change in employment. 

The first two bars for each sector reflect percent change in 

employment from 2019 to 2020 and 2020 to 2021. The third 

darker bar shows the cumulative employment change from 

2019 to 2021. Over the two-year period: 

• State 1 experienced a large net employment loss in 

Leisure and Hospitality jobs and a large net gain in 

Transportation and Warehousing.

in Transportation and Warehousing employment. Recall 

Introduction 

that Transportation and Warehousing incidence rates per 

worker are more than twice as high as those in Leisure and 


Hospitality. 

participation is still lower than the pre-pandemic rate. Labor shortages have led to wage growth, especially 

Worker payroll is determined by the number of workers 


and their average pay. Transportation and Warehousing 

Quit rates jumped in the middle of 2021 and remain high workers at the have time higher of this hourly writing—about pay than Leisure 50 million and Hospitality quits a 

workers, but not nearly twice as high. Therefore, like 

year, almost 10 million more than pre-pandemic averages. Many workers are new to their jobs. Some of these 

incidence rates per FTE worker, injury frequency per 


payroll is much higher in Transportation and Warehousing 

time, there are a large number of new remote workers. than Many Leisure people and left Hospitality. the office Thus, at COVID’s the shift onset; in industry there mix has 

been a trickle back, representing a massive change in the pushes amount frequency of remote up. This work upward compared pressure to before is shown the by 

pandemic. 

the blue bar for industry mix. 

• State 2 experienced the largest employment losses in However, Transportation and Warehousing injuries 

How Leisure do and such Hospitality large changes as well in as the meaningful labor market losses impact in workers compensation injury frequency? The magnitude 

have higher average severity than those in Leisure and 

of Construction these impacts and relies Manufacturing. on the interaction of three factors: Hospitality. Recall that high severity classes have low 

º In State 2, Transportation and Warehousing frequency per premium, whether or not they have high 


employment was stable rather than increasing. frequency per worker or per payroll. Thus, the shift to 

• How much has the share of such workers changed? Transportation and Warehousing (a high-severity class) 

What was the effect on frequency? In the chart below, we 

• How has the sector mix of the workforce changed puts during downward the pandemic? pressure on frequency per premium, 

break out impacts on each state from each of the three 

shown by the orange bar. 

channels, both on a per payroll and per premium basis. 

What happens when we put all three effects together? The 

The impacts of short-tenured and remote workers are of 

impacts of short-tenured workers and remote workers do 

similar magnitudes in the two states because the states’ 

not depend on the choice of frequency measure. More 

overall mix of business is broadly similar (in pre-pandemic 

short-tenured workers will always push frequency up and 

levels, not in the changes experienced during the 

more remote workers will always push frequency down. 

pandemic). Thus, we see the size of the blue bar for shorttenured 

workers for State 1 is similar to the size of the blue 

Only the impact of mix changes can differ based on the 

selected metric. 

bar for short-tenured 

workers for State 2. The 

same holds for crossstate 

The magnitude of the 

first two effects depends 

comparisons of 

on our estimates of 

the two orange bars for 

how many more shorttenured 

and remote 

short-tenured workers, 

as well as for both the 

workers there are and 

blue and orange pair of 

on such workers’ relative 

bars for remote workers. 

risks. The size of the 

bars show that in both 

Within each state, the 

State 1 and State 2, we 

blue and orange bars 

estimate the magnitude 

for short-tenured and remote workers are identical to each 

of the upward pressure from more short-tenured workers 

other. This occurs because that part of our calculation is 

is about the same size as the downward pressure from 

meant to isolate the change in incidence rates due to 

remote workers. 

changes in short-tenured or remote workers for the state’s 

pre-pandemic mix of business. 

Because these effects are partially offsetting, the impact of 

mix changes play a large role in our estimate of the total 

The effect of industry mix is the third element. Here the 

effect on aggregate frequency. In State 1, the growth in 

chart shows that frequency change depends critically on 

Transportation and Warehousing and decline in Leisure 

both the state’s experience and choice of metric. 

and Hospitality leads to a slightly upwards total effect 

The first panel of the chart shows the frequency change for 

State 1. Here the most important mix shifts were a decline 

in Leisure and Hospitality employment and an increase 

on frequency when measured per payroll. The combined 

increase due to short-tenured and sector mix effects is 

slightly larger than the downward pressure from more 


emote work. But the net impact on a premium basis is for on-site workers. Remote work was widespread at the 

downwards 

Introduction 

because the changing mix toward high severity onset of the pandemic, but the largest and most lasting 

classes in Transportation and Warehousing puts downward increases in remote work have been in the office-based 


pressure on frequency per premium. 

sectors Professional and Business Services, Financial 

participation is still lower than the pre-pandemic rate. Labor 

In State 2, the large employment decline in the low Activities, shortages and Information. have led to wage growth, especially 


frequency per payroll sector of Leisure and Hospitality 

Changing industry mix 

roughly offsets the declines in high frequency per payroll 

Quit rates jumped in the middle of 2021 and remain high at the time of this writing—about 50 million quits a 

sectors Construction and Manufacturing. The tiny blue The impacts from industry mix changes are more varied. 

year, almost 10 million more than pre-pandemic averages. 

bar indicates a small net impact of mix on frequency In both Many sign workers and magnitude, are new to frequency their jobs. effects Some from of these mix 

per are payroll. moving The from net impact one similar of all job three to another, effects is but slightly others change are changing depend industries critically on or both occupations. the nature At of the changes same 

downwards. time, there However, are a large Construction number and of new Manufacturing remote workers. are and Many the people choice of left frequency the office metric. at COVID’s All states onset; lost there a lot of has 

high-severity been a trickle classes back, like representing Transportation a and massive Warehousing, change in the Leisure amount and of Hospitality remote work jobs during compared the pandemic, to before but the the 

and thus they have low frequency per premium. The loss of total mix effect on a state (or an insurer’s book of business) 

pandemic. 

jobs in these sectors puts significant upwards pressure on depends on what happened in other sectors. 

frequency How do per such premium, large changes illustrated in the by the labor orange market bar impact for For workers example, compensation a shift from injury Leisure frequency? and Hospitality The magnitude to 

State of 2—the these impacts opposite relies sign as on in the State interaction 1. of three factors: Transportation and Warehousing employment puts 

These two examples demonstrate the complex nature of upward pressure on frequency per worker or per payroll 

the overall • frequency How much impacts more of or the less Great likely Reshuffle, are short-tenured as well but or downward remote workers pressure to on be frequency injured than per premium. other workers? When 

as the need • How for researchers much has the and share practitioners of such to workers carefully changed? Construction and Manufacturing employment declines 

understand • How their has change the in sector mix relative mix of the to their workforce intended changed along during with the Leisure pandemic? 

Hospitality, as in our State 2 

measurement before analyzing frequency impacts of example, frequency per payroll is barely affected, but 

mix changes. NCCI will continue to analyze industry mix there is sharp upward pressure on frequency per premium. 

changes and the impact on frequency and severity. 

CONCLUSION 

FINDINGS AND CONCLUSIONS 

These frequency effects are probably short-term anomalies. 

Three aspects of the Great Reshuffle have important The Great Reshuffle is a unique event, following the largest 

implications for workers compensation frequency: 

and most sudden decline in employment ever to strike the 

• More short-tenured workers 

US labor market. Some industry mix changes are likely 

to be permanent, such as a lower employment share in 

• More remote workers 

Leisure and Hospitality and a greater concentration of 

• Changing industry mix 

remote work. However, the rate of change in short-tenured 

workers, remote workers, or industry mix will not be as 

large in 2022 or any future year as the sweeping changes 

during 2020 and 2021. 

More short-tenured workers 

The increase in short-tenured workers puts upward 

pressure on injury frequency. While the increased share 

of short-tenured workers has been modest, their relative 

risk compared to full-tenured workers is high. Sectors 

with both a large increase in short-tenured workers and a 

high relative risk for such workers experienced the largest 

impacts, especially Transportation and Warehousing. 

Short-tenured worker share grew the most in Leisure 

and Hospitality, but its impact was muted because shorttenured 

workers’ relative risk in the sector is less than 

average. In office-based sectors, there has not been much 

change in short-tenured worker share. 

More remote workers 

Increased remote work puts downward pressure on injury 

frequency. The share of remote workers rose dramatically 

from pre-pandemic levels, but our selected estimate of 

remote workers’ relative risk is not much lower than that 


Through midyear 2022, new hire rates remain high, indicating 

that the share of short-tenured workers has stayed near 

2021 levels. Eventually, hiring will slow down, but this return 

to normal will be a gentle decline compared to the huge 

shocks from pandemic layoffs and subsequent rehiring 

during the Great Reshuffle. This lesser rate of change will 

have correspondingly smaller frequency impacts. 

Our Transportation and Warehousing scenarios provide 

examples of how frequency effects can still be substantial 

in sectors where short-tenured workers have relatively 

high injury rates and their share continues to rise. This is 

especially relevant to a book of business that emphasizes 

new or growing firms. 

Remote work will likely never fall back to pre-pandemic 

levels and no changes in remote work will be as large or 

rapid as the explosion of remote work in 2020. A large

percentage of jobs that are conducive to remote work These labor market changes during the Great Reshuffle 

are 

Introduction 

now being done remotely and many workers and will continue to impact workers compensation frequency. 

employers have embraced this flexibility. Remote work But any further ripples are expected to come from smaller 


will continue to be important to office and clerical sectors, year-to-year labor market changes than what we have 

as some participation firms continue is still to lower expand than remote the pre-pandemic or hybrid-work rate. Labor already shortages seen and have are led unlikely to wage to have growth, major especially effects on 

options strong and among others low-wage return to the workers office. and It will in be sectors important like Leisure long-term and Hospitality. frequency trends. 

to obtain better estimates of the relative risk of remote and 

on-site Quit workers rates jumped as employees, in the middle firms, and of 2021 insurers and get remain used high at the time of this writing—about 50 million quits a 

to remote year, almost work. 10 million more than pre-pandemic averages. Many workers are new to their jobs. Some of these 




pandemic. ACKNOWLEDGEMENTS 

The author would like to thank Len Herk, Carolyn Wise, Shawn Adcock, Kevin Fernes, Francesco Renna, and 

How Barry do Lipton such for large important changes contributions in the labor to market this study. impact workers compensation injury frequency? The magnitude 





ENDNOTES 

1 

We show this series from 1996 through 2018 in How Do Recessions Affect Workers Compensation? NCCI, October 16, 2019. 

2 

We discuss this for the case of auto manufacturing in our Supply Chain Disruptions and Their Employment Impacts, With Case Studies for 

Residential Construction and Auto Manufacturing, NCCI, December 13, 2021. 

3 

Data based on the January 2022 survey will be released later this year (2022), but even then we will need to rely on estimates created in part 

from other sources, as there will be no direct data on the share of short-tenured workers between January 2020 and 2022. 

4 

In this brief, we use the term “full-tenured” to mean all workers with at least one year at their current employer – the opposite of short-tenured. 

5 

The relative risks reported here are calculated from 2018 worker shares and injuries by tenure. We did similar calculations for each year from 

2011–2020 and found broadly similar relative risks across the whole period in terms of magnitudes and also differentials between different 

sectors. 

6 

We also collect hours worked from the CPS microdata, downloaded from IPUMS-CPS, to put worker shares in terms of full- time equivalent 

(FTE) workers. This is an important adjustment because short-tenured workers are more likely than full- tenured workers to work part-time. 

7 

This is in sharp contrast to retail sales workers, who have the second-highest concentration of short-tenured workers of any sector, behind 

only Leisure and Hospitality. 

8 

An in-depth discussion of how remote workers are defined and measured can be found in Remote Work Before, During, and After the 

Pandemic, NCCI, January 25, 2021. 

9 

This is calculated from a COVID-19 Supplement to the Current Population Survey. 

10 

COVID-19 Pandemic Continues to Reshape Work in America, February 16, 2022, Pew Research Center. 

11 

Remote Work Persisting and Trending Permanent, October 13, 2021, Gallup. 

12 

Part-time workers are more likely to have jobs that require in-person work in sectors such as Leisure and Hospitality or Retail Trade. 

13 

Telecommuting and Workers Compensation: What We Know, NCCI, January 25, 2021. 

14 

Specifically, we exclude “exposure to harmful substances and environment” cases in all years as a proxy for COVID-19 cases. This category 

was responsible for only about 4 cases per 10,000 FTE workers in each year from 2011–2019, but 43.5 cases per 10,000 workers in 2020. 

15 

There is slight upward pressure on frequency between 2020 and 2021 from a partial return to office of 2020 remote workers, but since Leisure 

and Hospitality has a high degree of in-person work and a low share of remote workers, the impact is small. This sector scenario is primarily 

about short-tenured worker shares. 

16 

As for Leisure and Hospitality, the 2020 to 2021 change also reflects minor impacts from the changing share of remote workers. 

17 

We break down pre-pandemic employment by state in our 2019 Q4 Quarterly Economics Briefing, Employment and Wage Growth by State 

and Economic Sector, NCCI, January 9, 2020. 

18 

NCCI primarily uses frequency per premium in ratemaking, but frequency is also calculated per payroll or per worker. The choice of frequency 

metric and differences between the various measures are discussed at length in NCCI Explains Its Top 3 Frequency Measures, NCCI, October 

15, 2018. 

WINTER 2022-23 THE BIG I VIRGINIA 23


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risk management tools that can help reduce and even 

eliminate exposures in their agency. They can visit 

our website to find technical bulletins on an array of 

subjects, or even access “ask an expert.” You can find 

these under the ‘resources’ link on our website.” 

— Lisa Harmon, 

COO 

“Do you have a topic you want your agents to know 

more about? IIAV can develop a class just for your 

needs. We love to provide in-house learning for our 

members. We are here to help with all your learning 

needs, including on-boarding, pre-licensing, sales 

training, and continuing education. We provide many 

choices and platforms to learn, including, in-person, 

virtual and on-demand options. Please let us know 

what your educational needs may be. We are here to 

help you grow!” 

— Debbi Little, 

Director of Professional Development and Programs 

“ 

“Are you an employer in the insurance industry looking 

for the right fit? Or are you looking for a career change 

within the insurance industry? IIAV has our very own 

career board, and it’s an excellent opportunity for 

anyone seeking either employees or employers. IIAV’s 

Career Board is the destination for those interested in 

a career in the insurance industry.” 

— Grant Brewer, 

Communications & Graphic Design Manager 


IRV METHODOLOGIES, 

REPLACEMENT COST 

iStockphoto.com/Olivia Rich 

AND 

RECONSTRUCTION COST 

By Chris Boggs 

Determining a structure’s insurance 

replacement value (IRV) is not complicated. 

Very few viable methodologies are available 

to develop an IRV. Any complications in 

calculating the IRV arise only because 

there are multiple sources for each option. Once the 

methodology and source are chosen, estimating the IRV is 

relatively simple. 

Although not complicated, developing and applying 

the correct IRV within the property insurance policy 

does not guarantee payment of the structure’s entire 

reconstruction cost following a major loss. Key provisions 

within the “standard,” unaltered commercial property 

policy (CPP) preclude payment of certain costs and 

expenses. The realities of “replacement cost” within the 

insurance policy can leave a large payment gap between 

the amount paid by the insurance policy and the cost to 

reconstruct the structure. 

The unexpected results of COVID have also created 

a problem. Not only must the realities of replacement 

cost and reconstruction cost be understood, but supply 

chain issues have increased the cost of construction and 

reconstruction. The cost to reconstruct may be abnormally 

high for the foreseeable future. 

ADJUSTMENT OF A 

MAJOR PROPERTY LOSS 

“Replacement cost” is a fundamentally misunderstood 

concept. Unfortunately, the insurance industry may be 

primarily to blame for these misconceptions. 

Over time, the insurance industry and its representatives 

have explained replacement cost to mean new stuff in 

place of old stuff. While there is a grain of truth in this 

description, this oversimplification of replacement cost 

has led to an expectation that is not supported by the 

policy language. 

Replacement cost coverage provided by the “standard,” 

unendorsed CPP pays ONLY for the part of the structure 

damaged by a covered cause of loss. Beyond providing 

coverage for ONLY the damaged part of the structure, 

the unendorsed CPP pays ONLY the amount necessary 

to rebuild the damaged structure back to its original 

condition using materials of like kind and quality (LKQ). 

These two ONLYs represent the key differences between 

the reality of replacement cost and the expectation of 

reconstruction cost following a major loss to the insured 

structure. The CPP pays: 

• ONLY to repair or rebuild the damaged part of the 

structure; and 

• ONLY to return the damaged part to its original 

condition and state regardless of building codes. 

A large property loss, if not total, exposes the 

shortcomings of replacement cost coverage. Following a 

major property loss, the building codes applicable to the 

damaged structure may disallow repair and may require 

the destruction of the undamaged portion of the building. 

None of the expense associated with the loss in value of, 

the demolition of and the removal of the undamaged 

portion is paid under a replacement cost policy. 

Additionally, no building can be rebuilt out of compliance 

with the applicable building code. Replacement cost 

coverage specifically excludes any additional costs 

necessary to bring the building into compliance with the 


uilding code. A replacement cost policy pays only to put 

back what was damaged and no more. 

A March 2021 New Hampshire Supreme Court ruling 

serves as a prime example of the issues with replacement 

cost in contrast to reconstruction cost. In 101 Ocean Blvd. 

LLC v. Foy Insurance Group Inc., Ocean Boulevard Hotel 

in Hampton, N.H. obtained a $2 million replacement 

cost policy that provided $10,000 in ordinance or law 

insurance coverage. 

In October 2015, a fire severely damaged the hotel. The 

insured was told the cost to replace the existing structure 

would be about $1.1 million and rebuilding it in compliance 

with the current building code would cost an additional 

$905,070. This is just slightly more than the $2 million 

replacement cost coverage purchased. 

The insured decided to demolish the structure rather than 

rebuild it. After accounting for depreciation, the insurer paid 

Ocean $910,141 for the structure’s replacement cost, which 

did not include the additional cost necessary to rebuild 

the structure in compliance with the building code. 

Although the insured had sufficient “replacement cost” 

coverage ($2 million), the reality of replacement cost in 

the unendorsed policy cost the insured (and ultimately 

the agent) $905,070. This is not an isolated incident; in 

conversations with insurance agent’s errors and omissions 

(E&O) insurance carriers, insufficient or improper 

explanation of replacement cost is a common error. 

“Replacement cost” does not pay what many have 

been led or conditioned to believe. Couple the reality 

of replacement cost with the fact that the requirements 

found in building codes have the potential to turn a partial 

loss into a total loss, and it becomes abundantly clear that 

replacement cost is insufficient following a major property 

loss. Reconstruction cost is the goal. 

• The undamaged part of the structure can be repaired; 

or 

• The undamaged part of the structure cannot be 

repaired and must be demolished and removed. 

Regardless which directive is given, the entire structure 

must be brought into compliance with current building 

code. Replacement cost, as has been demonstrated, does 

not pay these necessitated additional costs. 

Achieving reconstruction cost requires endorsements be 

attached to the commercial property policy. Specifically, 

Ordinance or Law coverage should be attached to every 

commercial property policy. 

Ordinance or law coverage is the primary step (not the 

only step) towards turning a “replacement cost” policy 

into “reconstruction cost” coverage. The CPP and the 

Ordinance or Law coverage dovetail following a “major 

loss” to get closer to accomplishing reconstruction 

cost. Following is an example demonstrating how these 

coverages work towards reconstruction cost. 

Undamaged Part – 

12,000 Sq. Ft. 

CPP Pays: 

• Cost to Remove the Debris of Damaged Part 

• Cost to Rebuild Damaged Part “as-is” 

FIRE DAMAGE – 

13,000 Square Feet 

1 Story – 25,000 square feet – Manufacturer – 15 Years Old – 12 Month POR 

Ordinance or Law (CP 04 05) Pays: 

• Value of Undamaged Portion (Cov. A) 

• Cost to to Remove Debris of Undamaged Portion (Cov. B) 

• Increased Cost to Rebuild ENTIRE Structure to Current Building Code (Cov. C) 


Rarely does a structure suffer a total loss, partial losses are 

statistically more likely. If the amount of damage in a partial 

loss situation crosses a specific threshold the building is 

judged to have suffered “major damage.” The meaning 

of “major damage” varies by state and may even vary by 

jurisdiction within a given state. 

Because there is no one countrywide definition or 

application of “major damage,” this concept cannot be 

detailed in this paper; only the results of what occurs when 

crossing the “major damage” threshold 

can be described in this report. 

When damage crosses the “major 

damage” threshold, the relevant 

building code official gives one of two 

directives regarding the undamaged 

portion of the building: 

Note that this is a partial loss that may become a total loss 

based on the application of the current building code. The 

jurisdictional building code official’s directive will likely 

turn this into a total loss by requiring the entire building be 

brought into compliance with the current building code. 

Which policy/endorsement pays which part of the loss? 

Lacking ordinance or law coverage, the only payment 

owed by a replacement cost policy is the amount in blue. 

The ordinance or law policy pays the amounts in red and 

green. Reconstruction cost can be achieved only when 

Ordinance or Law: Increased Cost of Construction 

Ordinance or Law: Cost to Remove the Debris 

of the Undamaged Portion of the Building 

Ordinance or Law: Value of the Undamaged 

Portion of the Building 

CPP: Cost to Remove the Debris of the 

Damaged Portion of the Building 

CPP: Cost to Rebuild the Damaged 

Portion of the Building 


all costs are covered by the CPP coupled the necessary 

Ordinance or Law and other endorsements. 

ORDINANCE OR LAW COVERAGE 

“Standard” Ordinance or Law endorsements (such as the 

CP 04 05 promulgated by Insurance Services Office (ISO)) 

contains three coverage parts: 

• Coverage A pays the value of the undamaged portion 

of the building; 

• Coverage B pays the amount necessary to tear down 

and remove the debris of the undamaged portion of 

the building; and 

• Coverage C pays the increased cost to bring the entire 

building (damaged and undamaged) into compliance 

with the current building code. 

Coverages A and B focus on and pay for the undamaged 

part of the building for one key reason – the property 

policy pays replacement cost to cover only those costs 

associated with the damaged part of the building. Only by 

endorsing these coverage parts onto the policy are these 

expenses covered. 

Coverage C applies to the entire building, damaged and 

undamaged. For the damaged portion of the building, 

Coverage C pays the difference between replacement 

cost and the cost to rebuild in compliance with the current 

building code. For the undamaged section of the structure, 

Coverage C pays the difference between Coverage A and 

the cost to bring that part of the building into compliance 

with building codes. 

Proprietary ordinance or law endorsements may apply 

different coverage parts. Rather than “Coverage A,” 

the policy may simply state, “Value of the Undamaged 

Portion.” Regardless how delineated, ordinance or law 

coverage generally provides these three coverage parts. 

COST OF ORDINANCE OR 

LAW COVERAGE 

When ordinance or law is endorsed onto a commercial 

property policy, as is common with all endorsements, an 

additional premium is required. The relative “cost” of an 

ordinance or law endorsement is low compared to the outof-pocket 

costs that may be suffered when it is not present. 

Coverage for the Value of the Undamaged Portion increases 

the building part of the property premium about 15%. 

The same rate applicable to the building coverage applies 

to Coverages B and C (debris removal and increased cost 

of construction). 

Let’s apply these costs to the building in the New Hampshire 

case briefed above. Because assumptions must be made 

regarding construction and protection to estimate a rate, 

for this example, the estimated rate is $0.50 per $100. The 

resulting premium at this rate is $10,000 for $2 million or 

replacement cost coverage. 

Value of the undamaged portion increases the premium 

approximately $1,500. 

The cost for debris removal of the undamaged portion 

applies the building rate to the limit chosen. A coverage 

amount must be assumed to estimate the premium. For 

this example, this limit is assumed to be $100,000. The 

additional premium for this limit is $500. 

The increased cost of construction (remember, this is 

applicable to the entire building) is estimated in this 

example at $500,000. For this amount of coverage, the 

additional cost is approximately $2,500. 

Total additional premium for this over simplified example 

is estimated to be $4,500. In the New Hampshire sample 

case, this $4,500 would have purchased the necessary 

$900,000 of required additional coverage. 

DEVELOPING ORDINANCE OR 

LAW COVERAGE LIMITS 

Value of the undamaged portion of the structure is the 

easiest limit to estimate because in standard ordinance or 

law endorsements, no estimation is necessary. The working 

of this coverage part (Coverage A in the ISO endorsement) 

states that this part pays the difference between the 

amount of damage and the coverage on the building. This 

is logical because there is no way to estimate how much 

will or will not be damaged so the limit must be able to 

fluctuate. 

Removal of the undamaged portion of the building is 

somewhat more complex to estimate for the same reason 

the value of the undamaged portion does not have to be 

estimated. There is no way to know before a loss how much 

will be damaged and how much of the building won’t be 

damaged. This is a pure estimate. A safe estimate may be 

between 5% and 10% of the building’s IRV. 

Where removal of the undamaged portion is a guess, 

developing the limit for the increased cost of construction 

(Coverage C) is an estimate of irreducible complexity. 

There is no “standard” or proven way to calculate the 

necessary limit. Only a best-guess estimate is possible. 

The estimation is a function of the age and condition of 

the building coupled with the changes in building codes 

over time. 

Although estimating the increased cost of construction 

is complex, some methodology must be behind the best 

guess estimate. One explainable method addresses age, 

condition and code changes applying a type of “dollar 

cost averaging” to developing the limit. Following is a 

reasonable and explainable methodology for developing 

an increased cost of construction limit. 


1. Choose a percentage of building value based on the 

age band; 

2. Multiply the applicable percentage by the value of 

the building; and 

3. Multiply the answer in “2.” by the age of the building. 

Example: 20-yr-old building valued at $1 million applying 

the 2% per year cost average. 

($1,000,000 * .02) * 20 = $400,000 Coverage C Limit 

The applicable age bands are: 

• 0-10 years: 1% 

• 11-20 years: 2% 

• 21-30 years: 3% 

• 31-40 years: 4% 

• 41-50 years: 5% 

• 51+ years: 6% 

Rather than choosing individual limits for removal 

(Coverage B) and increased cost of construction (Coverage 

C), the better choice is to combine these two coverages 

under one limit. This way if one is less than anticipated and 

the other is more costly than anticipated, the limits can be 

used for either expense. 

RECONSTRUCTION COST – 

BEYOND ORDINANCE OR LAW 

Ordinance or law is the primary method for “guaranteeing” 

(as much as possible) reconstruction cost. As a disclaimer, 

full reconstruction cost can never be guaranteed, but 

applying the proper methodologies and coverages allows 

the insured to get as close as possible. 

Other coverage options often necessary to accomplish the 

goal of reconstruction cost include: 

• 100% insurance to value (ITV); 

• Replacement cost; 

• Blanket limits; and 

• Inflation guard protection. 

INSURANCE TO VALUE (ITV) 

A provision within the CPP allows the insured to purchase 

less than the property’s 100% replacement cost to be fully 

insured for partial losses. The coinsurance provision allows 

the insured to carry 80% of the total insurable value and still 

be fully covered for any loss less than the limit carried. 

As is evident, the gap in this allowance is that the insured is 

not fully protected if the loss exceeds the limit of coverage 

purchased. The maximum paid by the insurance carrier is 

the policy limits carried. If the insured purchases limits less 

than the 100% insurable value, reconstruction cost cannot 

be obtained. 

REPLACEMENT COST 

Two valuation methods are common to insurance: 1) actual 

cash value; and 2) replacement cost. Actual cash value, in 

simplest terms, is the remaining life value of the property. 

Replacement cost, as the term suggests, does not consider 

the “used up” value, it values the property based on what 

a new piece of property would cost. 

BLANKET LIMITS 

When protection is provided on a blanket limit basis, 

one limit applies to multiple properties, multiple types 

of properties or a combination of the two. For instance, a 

blanket limit can apply to: 

• Multiple buildings; 

• Business personal property (contents) located within 

multiple buildings; 

• Combined values of real and personal property in one 

building; or 

• Combined values of real and personal property across 

multiple buildings. 

The advantage of blanket limits is that the entire limit is 

theoretically available for any one loss. If coverage for 

real property (the building) is miscalculated and too low, 

the difference may be made up by the remaining blanket 

amount. Obviously, the advantage of blanket limits is 

reduced when multiple properties or multiple types of 

property included in the blanket limit are damaged in 

one loss. 

However, there is a potential limitation to blanket limits 

that must be considered – the Margin Clause. 

Insurance Services Office (ISO) introduced the Margin 

Clause in 2007. More specifically known as, Limitation on 

Loss Settlement-Blanket Insurance (Margin Clause), the 

endorsement limits the payout for any one property or 

property type to a specific percentage of the limit provided 

by the insured in a statement of values for that building or 

business personal property. ISO’s available options are: 

• 105% 

• 110% 

• 120% 

• 130% 

The percentage is applied to the insurance value in the 

statement of values to develop the maximum payment for 

that particular property. Applying this limitation takes away 

the ability to use the entire limit for any one loss. 

For instance, if the property covers three buildings as 

follows: 

• Building 1: $200,000 

• Building 2: $250,000 


• Building 3: $100,000 

The blanket limit is $550,000. Applying traditional blanket 

limits, this total is available for any covered loss to any one 

of these three buildings. 

If Building 1 suffered a total loss and the actual replacement 

cost was $300,000, the entire loss would be covered by the 

blanket limit. 

However, if a margin clause is attached that applies the 

120% option, the maximum available to any one building is: 

• Building 1: $240,000 

• Building 2: $300,000 

• Building 3: $120,000 

(Obviously, if all three are destroyed in the same event, the 

maximum paid is the policy limit.) 

Because of the margin clause, if Building 1 suffered a total 

loss requiring $300,000 to replace, the maximum the policy 

would pay is $240,000. The insured would be out of pocket 

$60,000 due to the margin clause. 

If the carrier requires attachment of a margin clause, 

the highest allowable percentage should be used. 

Interestingly, use of a margin clause does lower the 

premium attributable to blanket coverage. 

INFLATION GUARD OPTION 

Unexpected events can increase the cost of reconstruction 

during the policy period. Higher than expected building 

costs, a natural disaster, a disruption in the construction 

material supply chain, an increase in labor costs, etc. are all 

possible. Such events increase the cost of reconstruction. 

Within the CPP is the option to apply a hedge against 

these unexpected increases known as Inflation Guard. 

This coverage 

option increases 

the amount of 

coverage on a 

daily, pro-rata basis 

throughout the policy 

term. 

For example, assume a building 

valued at $100,000 has the 6% 

inflation guard option added to the 

policy. Six months into the policy term the insured has 

$103,000 available if needed (1/2 of 6%). The amount of 

coverage increases a small amount each day. 

Applying the inflation guard option is one more step 

in hitting or getting as close to possible to a structure’s 

reconstruction cost. The available inflation guard 

percentages begin at 2%. According to ISO rules, the 

percentage is in 2% increments and can be as high as the 

carrier will allow (thus the maximum percentage varies 

Reconstruction Cost 

Ordinance or Law 

Blanket Limits 

Inflation Guard 

100% Insurance to Value 

Replacement Cost 

from carrier to carrier). Each 2% increment adds about 1% 

to the property premium. 

BUILDING TO 


Developing and building to reconstruction cost requires 

the use of many different options and endorsements 

available within the commercial property program. Given 

the information provided in this report, following is a chart 

demonstrating how these parts build to reconstruction cost. 

COVID AND 


COVID has created conditions no one (well, maybe a 

few) ever anticipated. The cost of building materials 

has skyrocketed during the shutdowns and subsequent 

movements towards reopening. Supply chains have been 

disrupted, delaying delivery of materials; individuals and 

businesses have undertaken renovations and additions 

due to time (and boredom), causing increased demand. 

Contractors are booked solid, causing labor and timing 

issues. 

Because of COVID and the resulting issues, insurance 

professionals must address the realities of reconstruction 

costs with their clients. Even if an inflation guard 

endorsement is attached, the percentage is likely too low 

in wake of the current situation. 

Mid-term limit adjustments may be necessary. At the very 

least, notify insureds via a letter or other communication 

of the current construction cost reality and document the 

notification in the client’s file. 


Employees are essential to a 

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coverage that protects them. 

Summit is here—not only to 

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summitholdings.com 

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The Big I Virginia Winter 2022-23

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