7 Key Trends Reshaping Workers’ Compensation Claims in 2025

In 2025, the workers’ compensation market is facing mounting complexity as shifting demographics, medical inflation, regulatory changes, and advanced technology alter how claims are managed. This report reviews 7 key trends reshaping workers’ compensation for insurers, offering actionable strategies to bolster efficiency, manage risk, and sustain profitability.

As we move through 2025, here are the most significant trends shaping workers’ compensation claims, and how carriers can respond effectively.

1. Medical Inflation Is Pressuring Loss Costs

While workers’ comp remains one of the more profitable lines in P&C, medical cost inflation is becoming a growing concern. Rising expenses for diagnostics, pharmaceuticals, and outpatient treatments are contributing to increased claim severities.

Medical inflation and rising wages are driving up claim costs. CMS projects healthcare spending will grow by 5.4% through 2028, and the NCCI estimates a 6% increase in average total lost-time claim severity over last year, primarily due to rising wages.

Trend Insight:

• Medical inflation has outpaced general inflation, with WC medical costs rising approximately 6–8% year-over-year.
• High-cost specialty drugs and compound medications are contributing to larger reserves and longer claim durations.

Implication:

Carriers should focus on pharmacy controls, utilization review, and predictive analytics to contain medical costs.

2. Mental Health Claims Are Gaining Recognition

The pandemic and its aftermath placed a spotlight on mental health, and in 2025, more jurisdictions are recognizing stress, PTSD, and anxiety-related claims, especially for first responders and healthcare workers.

Claims are increasingly complex due to a focus on mental health. New York’s January 2025 law now allows workers to claim compensation for extreme job stress, not just first responders, requiring carriers to adapt their processes for longer recovery times and specialized care.

Trend Insight:

• Over a dozen states have expanded WC coverage to include specific mental injuries.
• Psychological components are increasingly part of traditional physical injury claims, prolonging recovery and return-to-work timelines.

Implication:

Insurers need integrated claims models with behavioral health resources, early intervention, and access to mental health providers.

3. Aging Workforce Equals More Complex Claims

With many baby boomers remaining in the workforce and skilled labor shortages across industries, older employees are working longer. This trend has led to a rise in injury severity, comorbid conditions, and longer claim durations.

The Bureau of Labor Statistics forecasts that the workforce aged 75 and older will increase by 96.5% from 2020 onward to 2030. In contrast, new employees are statistically more likely to get injured. A study by Travelers found that first-year employees account for 35% of all workplace injuries.

Trend Insight:

• Workers aged 55+ now account for over 25% of serious injury claims.
• Recovery and indemnity durations are longer for older workers, who also face a higher prevalence of comorbidities.

Implication:

Claims teams should tailor medical management and return-to-work programs to account for the risks associated with aging and comorbidities.

4. AI and Analytics Are Revolutionizing Claims Handling

Artificial intelligence is transforming claims, automating triage, and predicting litigation risk. Leading carriers use analytics to segment claims and allocate resources more efficiently.

Although catastrophic claims costing over $2 million make up less than 0.1% of claims, they can account for as much as 2% of total costs. AI-powered predictive analytics are helping carriers identify early indicators of high-cost claims, enabling them to intervene proactively. This technology enhances the underwriter’s ability to assess risk and a claims adjuster’s capacity to manage complex cases more effectively.

Trend Insights:

• Predictive models can now identify high-risk claims within days of injury, allowing for early intervention.
• Chatbots and virtual nurse case managers are helping reduce adjuster workload and improve injured worker engagement.

Implication:

Invest in automation and predictive analytics to reduce costs, expedite claim processing, and enhance outcomes.

5. The Regulatory Landscape Is Shifting

States are continuing to evolve WC statutes, fee schedules, and compensability rules, particularly around remote work injuries and expanded presumptions. Traditionally, this applied to a limited number of occupations; however, new legislation now encompasses a broader range of professions and conditions.

For example, in California, presumptive coverage has been expanded to include more healthcare professionals and certain essential retail workers for conditions such as infectious diseases and specific types of cancer.

The expansion of presumptive coverage means more claims are being presumed as work-related, making it harder for insurers to deny them.

Trend Insights:

• Several states have introduced or expanded presumptive coverage laws for COVID-19 and PTSD.
• Remote work injuries (e.g., slips at home) are triggering new questions around compensability.

Implication:

It’s a good idea for carriers to stay updated on legal changes. Insurers require local expertise and flexible claims strategies to navigate evolving regulations.

6. Return-to-Work (RTW) Programs Are Being Reimagined

Employers (including carriers) are adopting more flexible and inclusive return-to-work programs that address both physical and psychological recovery. The emphasis is moving from compliance to employee engagement and sustained recovery.

Return-to-work programs are crucial for mitigating costs and enhancing employee well-being. Safe, modified duty helps employees return to work sooner, reduces claims, and promotes a faster recovery.

Research indicates that injured workers who resume work with modified duties recover 30% faster than those who do not work at all until they fully recover. Effective RTW programs help close claims 20% faster and at 25% lower cost, shifting claims to medical-only and improving the e-mod.

Source: Top Workers’ Compensation Trends in 2025 | DirectWorkComp

Trend Insights:

• Progressive RTW programs have been shown to reduce indemnity costs by 30–50%.
• Telehealth and virtual vocational rehab are enabling earlier interventions and modified work opportunities.

Implication:

Work with employers to implement customized RTW programs that support gradual reintegration and track functional recovery.

7. Fraud Detection Is Getting Smarter

Although workers’ compensation fraud is less prevalent than in other lines, it still leads to significant unnecessary costs. Enhanced data sharing and real-time analytics are enabling carriers to detect suspicious behavior more effectively.

A report from the Coalition Against Insurance Fraud and SAS found that the use of predictive analytics for fraud detection has grown significantly, and with it, so have the referrals. According to the study, 39% of insurance companies reported that more than 30% of their fraud referrals came from their automated system, a substantial increase from just 20% in a similar study three years earlier.

In a specific case study, CNA’s Special Investigations Unit (SIU) projected a 20% increase in annual referrals to their unit after implementing a new fraud detection solution from SAS. They also projected a significant increase in the identification of organized fraud schemes.

Trend Insight:

• Carriers can now detect red flags, such as inconsistent injury reports, off-the-grid travel, or social media activity, using AI-driven surveillance tools.
• 39% of insurers reported that more than 30% of their fraud referrals originated from their automated fraud detection system.

Implication:

By combining machine learning with human investigation, carriers can have more effective fraud mitigation.

Final Thoughts

The workers’ compensation market is navigating emerging risks while leveraging advanced tools for claims insight and intervention. Although the fundamentals remain strong, proactive carriers should invest in technology, medical management, and personalized care strategies to maintain profitability and improve outcomes.

By embracing innovation and adapting to evolving workforce realities, P&C insurers can stay ahead of the curve and deliver better results for both employers and injured workers.

Follow us on LinkedIn to learn more about our upcoming Workers’ Compensation Roundtable on November 13th, after the National Workers’ Compensation conference in Nashville.