Posts Tagged ‘frequency and severity’

Minnesota Issues Workers Compensation System Report

Tuesday, August 10th, 2004

Minnesota’s Department of Labor and Industry just issued a Workers’ Compensation System Report that covers data and trends in the state’s system from 2000 through 2002. The good news? Claims fell by more than 15% during that time. The bad news?
” … cost per $100 of payroll rose 18 percent during the same two-year period. The report estimates the cost rose to $1.58 per $100 of payroll in 2002 from $1.34 in 2000.
This echoes a national trend of a decrease in frequency and an increase in severity. Also, for the first time in the state, the medical portion of the claim eclipsed the indemnity portion in terms of overall costs. The full report can be accessed online through the link provided above.

Workers’ Compensation Industry Results For 2003

Tuesday, May 11th, 2004

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.