Workers’ Compensation Industry Results For 2003

May 11th, 2004 by

The National Council on Compensation Insurance today announced 2003 workers’ compensation results. In “The State of the Line: Analysis of Workers Compensation Results,” the NCCI struck a cautionary note.

Frankly, we find the data are both interesting and confounding. For the sixth straight year, claim frequency, the total number of claims, has declined. Many industry people take great comfort in this. Safety efforts seem to be bearing real fruit. However, the declines in the past few years have mostly been in the less severe injury types. Moreover, BLS data show that frequency has declined in 6 of the last 7 recessions. Perhaps there’s more going on here than successful safety. Maybe more workers than usual who suffer minor injuries are choosing to tough it out in the workplace, rather than go out on workers’ compensation and risk being replaced. Something to think about.

But we think that the real story lies in the industry’s indemnity and medical costs, the claim severity. Consider these facts. First, in 2003 the average total cost of a claim increased to $34,600, up from $32,400 in 2002. Second, the average indemnity cost of a claim, the wage replacement portion, at $16,800, rose for the tenth straight year, this year by 4.5%. Third, the medical portion of the average claim, at $17,800, rose 9% and, for the second year in a row, exceeded the cost of indemnity.
At $42 billion, workers’ compensation is big money in America. It’s a lot to comprehend. Every 1% is $420 million. In 2003, the industry scored a combined ratio of 108%. Seventy percent of that went to losses, alone. The rest, to various expenses. That 70% is what employers can impact by their actions, their behaviors. In future posts we’ll discuss how.

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