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Continuing job losses could hammer comp


Last week's Labor Department announcement that job losses accelerated in September hasn't helped ease concerns that as the recession drags on, a spike in related claims is inevitable.

“This recession has gone on long enough that, in my mind, you are going to start seeing an uptick in incidents and severity,” said Mark Noonan, a managing principal at Integro Insurance Brokers Ltd.

The government reported Friday that the rate of job losses jumped to 9.8% in September, up from 9.7% in August. The 263,000 jobs lost last month were more than analysts had predicted and a sign that joblessness has a significant potential to continue.

Many in the comp industry have been taking comfort from NCCI Holdings research released earlier this year showing that the rate of workplace injury and illness declines during recessions.

The report was meant to reconcile past evidence that workplace injuries decline during recessions and a widely-held belief that layoffs can drive a spike in claims.

While NCCI's research provides data that claims will drop, the current recession is already unusual for it's duration. And as it continues, workers continue to fear for their jobs. That fear could be driving many to work with illness or injury and forego reporting their condition.

Comp researchers have referred to recessions and the accompanying fear of job loss as having a “disciplining effect” on workers, which leads to fewer claims filed.

But that effect may only last so long.

“People who are worried about their jobs, who are working through minor aches and pains…they are going to start to break down,” Mr. Noonan said. “You are going to start to see an uptick in reported claims because of the nature of working with a disability or with minor aches and pains, but continuing to do their jobs."

Comp industry observers respect Mr. Noonan's opinions because he has spent more than 30 years helping employers develop comp strategies and programs. He only recently joined Integro, but before that he was at Marsh Inc. for many years and served as the broker's national work comp practice leader.

Because of individual retirement portfolio losses accompanying this recession, people are continuing to work as they get older, rather than retire. That too could increase the potential for latent recession-related claims, Mr. Noonan said.

It's a worrisome prospect because the comp industry has enjoyed a decrease in claims frequency over several years that has countered increasing severity.