Fall in comp claims coming to an end?Reprints
A long-term trend of declining frequency of workers compensation claims has flattened, insurers say.
The widespread shift is significant because declining frequency of workers comp claims—or lost-time claims filed per payroll dollars—has helped counter rising costs driven by the severity of claims, said Eric Brosius, senior vp and corporate actuary for Boston-based Liberty Mutual Group Inc.
Claims frequency, which had been falling an average of about 4% per year because of safety programs and worksite automation, is a substantial driver of workers comp loss costs and rates, other observers said.
But the change in the frequency of claims could be a temporary fluke driven by the ailing economy, observers said. For instance, financial pressures could have eroded some employers' ability to fund safety programs that reduce worker injuries.
Hiring of employees who are less experienced and more prone to injuries than experienced workers also could be a factor, others added.
For example, Hartford Financial Services Group Inc. has seen decreases in claims frequency moderate during 2010, Glen Pitruzzello, vp of workers comp claim practices for the Hartford, Conn.-based insurer, said in a statement.
It is “too early to determine whether this indicates a reversal in the long-term trend that has occurred since the 1990s, a floor on frequency that will remain for the foreseeable future or a temporary pause in the long-term downward trend,” Mr. Pitruzzello said. “However, given the conventional wisdom that newer, lesser-experienced workers tend to have a higher incidence of workplace injuries, this could be an early indication of a strengthening job market and an improving economy.”
Meanwhile, self-insured em-ployers may be seeing an increased number of claims, although that is not the same as an increase in claims frequency as measured by insurers and insurance rating organizations.
“We are seeing flattening or small increases of new workers comp claim counts” among self-insured employers, said Keith Higdon, senior vp and business intelligence director of Memphis, Tenn.-based Sedgwick Claims Management Services Inc. “But we can't say conclusively at this point the extent to which the trend is driven by changing patterns of behavior as opposed to changes in the total number of people at work.”
Liberty Mutual's data, however, shows that the frequency has flattened or even increased slightly based on the number of claims filed per employer payroll.
That happened in 2009 and has appeared to continue throughout 2010. The shift to flattened or slightly increased claims frequency is evident across Liberty Mutual's entire workers comp book of business, including all industry segments, U.S. regions and employer sizes, Mr. Brosius said.
Because it is “happening everywhere, we are convinced it is not a blip,” Mr. Brosius said.
Accident Fund Holdings Inc. saw workers comp claims frequency flatten “vs. its normal trend” beginning late in 2009, said Lisa Riddle, vp of claim operations for the Lansing, Mich.-based workers comp insurer.
The pattern continued throughout 2010 across all U.S. regions, she said.
“We have been seeing it and I know a lot of the public (insurance) company CEOs have been commenting on it,” Ms. Riddle said.
Southfield, Mich.-based Meadowbrook Insurance Group Inc. has seen “pockets” of the workers comp program business it underwrites experience flatter or slightly increased claims frequency, said Archie McIntyre, senior vp of business development.
While some Meadowbrook programs continue to experience favorable frequency decreases, other programs with a history of falling frequency are now seeing that trend flatten out.
“There is some newness in some areas to change toward flattening from what was previously a consistent reduction,” Mr. McIntyre said.
Some rating organizations also report seeing a potential shift in claims frequency in some states. Because rating organizations rely on insurers for claims data, their information is not as current as underwriters'.
For instance, the Workers' Compensation Insurance Rating Bureau of California said one of its measurements is showing that claims frequency has turned positive, a spokesman said. But that measurement is based on a “raw” count of claims filed and is not the bureau's best frequency indicator.
A better indicator of frequency will emerge about a year from now, after insurers provide the rating bureau with claims data that weighs how many workers that insured employers have on their payrolls at the end of the policy year vs. the number of employees they estimated when coverage was purchased, the spokesman said.
But if claims frequency is rising, employers can help counter the trend, sources said.
Santa Barbara, Calif.-based Select Staffing Inc., for example, saw its injury frequency start to climb at the beginning of 2010, said Fred O. Pachón, vp of risk management and insurance. So the company that provides temporary workers implemented more safety initiatives that knocked its claims frequency down about 10%, Mr. Pachón said.
“So I would say that (our claims frequency) is feeling pretty flat now,” Mr. Pachón said.