Important Trends in Workers’
Compensation: Declines in claim frequency slowing
In its latest research study, the National Council on Compensation Insurance
(NCCI) reports that the decline in claim frequency for Workers’ Compensation
injuries has continued into 2007, but the magnitude is much smaller than
in the previous two years. Preliminary results indicate a modest decline
of 2.5% for 2007, compared to 6.7% in 2006 and 6.8% in 2005.
According to the report, while declines in claim frequency are slowing,
indemnity and medical severities continue to rise. Medical claims costs
in 2007 continued to grow faster than the Consumer Price Index for Medical
Care – 6% compared to 4.4%, while indemnity severity outpaced wage
inflation – 4.0% to 3.3%.
The report also examined claim frequency changes for permanent total claims,
the costliest 1% of lost-time claims and makes the following key findings:
• Permanent total claims have increased significantly
over the last three years
• The rise in permanent total claims is evident across industries,
regions, and payroll sizes
• From 2004 to 2006, the increase in permanent total claims may have
increased lost-time indemnity severities by approximately 1.5% per year
and lost-time medical severities by approximately 2.5% to 3% per year.
As NCCI notes, “A key issue facing employers today is whether the
large declines in claim frequency that began in the 1990s are likely to
continue.” These results suggest that the growth in claim frequency
decline is indeed flattening.
NCCI indicates that the key drivers of claim frequency include global competition,
increased use of robotics, increased use of modular design and construction
techniques, increased use of power-assisted processes, advances in ergonomic
design, and proliferation of cordless tools. Other factors include the impact
of more and better job training, continued emphasis on workplace safety,
a down economy where fewer untrained workers are being added to payrolls,
older workers who tend to have fewer (although more costly) injuries and
fraud deterrents.
While continued progress can be expected in automation and technology, it
is possible that we are reaching the inflection point of declining claim
frequency. Employers can no longer afford to be complacent and look to declining
claim frequencies to help keep rates low. A comprehensive program of injury
management is the only way an employer can maintain long-term control. |