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Workers compensation downward claims trend ending?


A recent upturn in the frequency of workers compensation claims may be driven by factors typically seen as the economy moves into recovery from a recession, observers say.

Although it is too early for data to verify whether a slight rise in claims amounts to an ongoing trend, recent hiring of new, temporary and seasonal workers may be among factors behind a 2% to 5% increase in claims over the past year, they add.

Safety and risk management budgets that were slashed during the Great Recession, a leaner labor force doing more work and employees losing fear of filing claims as alternative job prospects improve also may be factors, said Joe Picone, chief claim officer in Glen Allen, Va., for Willis North America's strategic outcomes practice.

The U.S. Bureau of Labor Statistics reported this month that nonfarm employment rose by 200,000 in December and by 1.6 million over the past year, with job gains in transportation, warehousing, retail, manufacturing, health care and mining.

Meanwhile, claims professionals at the nation's largest workers compensation insurers tell him they have seen claims frequency climb 3% to 4% during the past year, Mr. Picone said.

“Everybody says, "We have seen it,' but nobody is quite sure why,” Mr. Picone said.

Historically, claims surge at the end of recessions as new, temporary or seasonal workers typically suffer more injuries than experienced employees.

Although hiring remains anemic, the 18-month-long Great Recession ended in June 2009, according to the Cambridge, Mass.-based National Bureau of Economic Research.

Recently created jobs are lower paying, which tend to drive more claims than better paying jobs, said Neil Harrison, group managing director of risk control, claims and engineering for Aon Global Risk Consulting, a unit of Aon Corp. in Chicago.

“The sort of hiring that is going on is at the level in an organization that is likely to drive frequency up,” Mr. Harrison said.

He said he believes improved employment numbers are starting to drive lost-time claim volume upward, amounting to a 2% to 5% increase.

Charles F. Martin, the Norwalk, Conn.-based national claims consulting practice leader at Marsh Risk Consulting, a unit of Marsh Inc., agreed that comp claim frequency is up, as is severity.

As the economy continues to improve, Mr. Martin said he believes claim frequency and severity will continue to increase.


However, not all workers comp professionals report seeing an increase in claims, while other observers are skeptical that there is a link between recent hires and workers comp claims.

“It's way, way too early” to determine whether those just hired are responsible for recently filed claims, said Bruce Hockman, executive vp and workers comp practice leader in Philadelphia for Towers Watson & Co. “There isn't even enough anecdotal information to suggest one way or another.”

Additionally, sources at several third-party administrators say they have not seen a spike in claim volume but note that still may happen.

“What we are experiencing is not really an increase in the actual number of claims,” said G. Bryan Thomas, president, CEO and chairman of Danville, Ill.-based TPA Cannon Cochran Management Services Inc. “Rather, we are seeing an increase in employer payrolls, which ultimately should drive an increase in claim occurrences.”

Aon's Mr. Harrison agreed there is not yet data to substantiate an ongoing trend.

“Is it too early to be scientific about it? Yes,” Mr. Harrison said. “What we are sensing, though, is the volume is on the uptick. There is more discussion and concern than we have seen for 18 months or so from our risk manager clients about what the volume is going to be.”

While the rise in claims is small, it does represent a reversal from claim volume decreases experienced during the depth of recession, Mr. Picone added.