Posts Tagged ‘risk’

Cavalcade of Risk and other news items of note

Wednesday, August 22nd, 2012

Emily Holbrook does a stellar job hosting Cavalcade of Risk #164 at Risk Management Monitor. A sampling of recent posts on varied topics may tell you why Risk Management Monitor is on our regular reading list and one of our favorite blogs: The Formal Demands of a Somali Pirate, The 3 Most Curious Claims, and Insurance Claims from Colorado Wildfires at $450 Million and Growing.
Industry pulse – At propertycasualty360, Stephen Klingel offers an explanation of conflicting signals in the latest NCCI Workers Comp State of the Line report. He discusses why the market remains “worrisome” despite a number of positive developments. On the plus side, we see that claims frequency is down and written premium is up, but the industry’s reserves are deteriorating and the residual market is growing – indicators that bear watching. He cites claim frequency, the underwriting cycle. uncertainties related to healthcare and financial services reforms, and efforts to expand alternatives to Workers’ Comp as additional areas of concern that NCCI is monitoring.
Paid sick leave & workers comp study – A recent NIOSH-related study revealed that workers with paid sick leave were 28% less likely to report an occupational injury that needed medical care than workers without paid sick leave. Also, workers in high risk jobs appeared to benefit more. The survey encompassed 38,000 workers and was based on data collected by the National Health Interview Surveys from 2005 through 2008. While survey authors caution that the survey does not establish a a cause-and-effect relationship between paid sick leave and the incidence of workplace injuries, it does raise the issue that workers who do not have paid sick leave may feel economically pressured to work while sick, exposing them to greater likelihood of injury.
Right to safe workplaces – Kevin Jones raises the question of whether safe work is a basic or fundamental human right on the Australian SafetyAtWorkBlog. He raises this question both specifically for Australia, but also from a global perspective.
Healthcare & politics – Wondering about the healthcare implications of Romney’s vice presidential pick? Joe Paduda is on the case: At Managed Care Matters, he posts about Paul Ryan’s evolving stance on deficits and Medicare spending.
Healthcare workers and mass trauma – Dr. Camilla Sasson was on duty in the Emergency Department of the University of Colorado Hospital on the night of the Aurora shootings. She talks about her experiences that night on the RWJF Human Capital Blog, offering insight into the extreme stress that healthcare workers face during and after a mass casualty event – as well as how patients help the doctors heal.
Other news of note

Risk Transfer as Three-Card Monte

Tuesday, May 22nd, 2012

When you’re looking for ethically-challenged business practices, Florida is usually a good place to begin. The latest kerfluffle involves a toxic combination of very high deductibles for workers comp insurance and employee leasing companies. Oklahoma based Park Avenue Property and Casualty Insurance sold policies with deductibles as high as $1 million to PEOs. Think about that for a moment: a million dollar deductible is virtually self-insurance, as very few claims break that formidable barrier. Park Avenue, along with its successor companies, sold these policies to employee leasing companies, who in turn passed the coverage through to their client companies. With such a huge deductible, the coverage must have been relatively inexpensive compared to standard market rates.
Under large deductible programs, the insurance company pays all the bills and then seeks reimbursement from the client company, up to the deductible amount. It’s not hard to figure out the flaw in this business model: client companies will welcome the discounted premiums, but when it comes time to pay back the insurer for paid losses, they will be unable to cut the checks. Given the complete absence of regulatory-mandated collateralization for the claims liability, there is no way the insurer will be reimbursed for large loss claims.
That’s where the three-card Monte comes in: the insurer wrote these policies knowing full well that the deductibles would never be paid. That’s why Park Avenue morphed into Pegasus Insurance, which morphed into Southern Eagle Insurance, which flies off into the pastel sunset of bankruptcy.
Gaming Risk Transfer
The cards have been moved around at blinding speed, but who ends up paying? Once again, those who played by the rules will have to pay for those who didn’t. (For a more egregious example of punishing the innocent, see our blogs on the New York Trusts.) Policy holders in Florida will be charged somewhere between 2% and 3.5% of premiums to cover the $100 million plus of losses.
In the WorkComp Central article by Jim Sams (subscription required), Paul Hughes, CEO of Risk Transfer Company, which markets insurance to PEOs, complains that singling out the PEO industry is unfair. The state should never have allowed Park Avenue and its winged successors to write insurance, as they were clearly incapable of assuming the risk. True enough, but even Hughes would have to admit that the PEO industry offered a ripe venue for the scam: individually, PEO clients would never have qualified for high deductible coverage, but somehow, under the collective umbrella of a PEO, they did.
Meanwhile, PEOs are being sued for failing to reimburse the claims payments of Park Avenue and its successors. After the PEOs lose these cases, they will seek payment from their clients, who are unlikely to have the ability to pay anywhere near what is owed. The litigation will go on for a long time, but the bottom line is simple: risk transfer cannot exist where none of the parties can cover the exposure. That isn’t risk transfer: it’s a shell game, where those who did not play are left holding the bag.
Follow Up – June 7, 2012
After posting this blog, I received a call from Paul Hughes, CEO of Risk Transfer in Florida, who is quoted above. While not contesting the premise that large deductibles are poorly managed in Florida (and elsewhere), he believes that I unfairly singled out PEOs in the blog. The fundamental issue is the failure of the state to adequately regulate and oversee large deductible programs. I agree.
Please take a few moments to read Paul’s response, which employs the useful metaphor of a casino for the risk transfer industry:

The core issue to me is the role of the regulator versus the business owner in the management of the “casino” (insurance marketplace). That is one of the parts of Jon’s article in Workers Comp Insider that blurs the line a bit on what the PEO’s role is within the casino and whose job it is to set the rules. The casino is the State as they certify the dealers to play workers’ compensation (Carriers, MGU’s, MGA’s, Agents and Brokers) and the State also certifies that the players are credible (not convicted of insurance fraud) and can pay/play by the rules of the house. The rules are set by the house and the games all require public filings – ability to write workers’ compensation (certificate of authority), ability to offer a large deductible plan (large deductible filings), agent license, agency license, adjusters license and any other deviation from usual business practices (like the allegations that one now defunct insurance carrier illegally charged surplus notes to desperate PEO’s in the hardest market the industry has ever seen). The “three-card monte” that Jon alludes to in this article is managed not by the dealers (carriers), but by the house (state). Would a real life casino consider it prudent to allow one of their dealers to expose 20% of their $5m in surplus through high deductibles sold to PEO’s with minimal financial underwriting and inadequate collateralization? Would any casino write harder to place (severity-driven) clients to include USL&H, roofers etc with the minimum amount of surplus needed to even operate a carrier…? Of course not. These “big boy” bets would never be allowed in Vegas without the pockets being deep enough to cover the losses.

Cavalcade of Risk Plus Frisky Risk Management

Wednesday, May 16th, 2012

The latest edition of Cavalcade of Risk, hosted by Dennis Wall at Insurance Claims and Issues, is up. It’s the risk-free option for checking out a potpourri of interesting posts related to risk.
And while we are on the topic of risk, let’s give a Bronx cheer for Jamie Dimon, CEO of JP Morgan Chase, for the work of his risk management team. The bank’s $2 billion plus loss was the result of “sloppy” and “stupid” trading, a “mistake” which involved “bad judgment,” and which caused losses that are “very unfortunate” and that come at an “inopportune time,” but which in any case are not “life threatening.” The risk management team is supposed to prevent such problems, not perpetrate them. Oh, well, that’s just the risk you take when your frisky risk managers manage risk.

Risk roundup, and occupational gizmos & gadgets

Thursday, January 26th, 2012

It’s a pop quiz style risk roundup this week where you can match wits with the riskmeisters. The Notwithstanding Blog hosts the Cavalcade of Risk #149: Single Best Answer edition.
In other matters, we will use this week’s roundup here at Workers Comp Insider to highlight some useful gizmos and gadgets that have been accumulating in our bookmarks folder: a grab bag of work-related mobile apps and calculators that we hope you’ll find useful!
There’s an app for that
DOL data apps – Backed by prize money, last summer the Department of Labor issued an Occupational Employment Statistics challenge to developers to use DOL data in innovative, creative, and useful ways that would empower job seekers and consumers. Winning apps were recently announced – they include job trackers and occupational wage watchers – but our favorite is Eat Shop Sleep, an app that allows you to geographically shop for hotels and restaurants, and to narrow your results based on health and labor violations, as well as local reviews.
The DOL itself offers a few mobile apps – a labor statistics tool, a timesheet, and an OSHA heat safety tool. See the full menu of USA.gov features various mobile apps – a few that look particularly helpful include PTSD Coach, MedlinePlus Mobile, and U.S. Federal per-diem rates. And we can’t resist pointing out the MEanderthal, a Smithsonian app that allows you to upload a photo and morph into a neanderthal – not particularly work-related, unless you want to create an unusual portrait bulletin board for your work team. (See a fun video of MEanderthal in action).
Accessibility App – Another app development challenge sponsored by the Knight Foundation and the Federal Communications Commission yields a tool with great potential for people with disabilities. Access Together, is a crowd-sourced Foursquare-style app, which incorporates user information about accessibility of various locations. All answers will be saved and become part of a searchable dataset, map and open API to be used by people with and without disabilities.
Distracted DrivingDriveSafe.ly is a mobile application that reads text (SMS) messages and emails aloud in real time and automatically responds without drivers touching the mobile phone. DriveSafe.ly bills itself as “the solution to texting while driving.” It’s available in either a personal or a business/enterprise edition.
Calculators
Push Pull Carry Calculator – Canada’s WorkSafeBC is a great source of quality health and safety resources. Check out the Push Pull Carry Calculator, a tool designed to help prevent musculo-skeletal injuries.
Ergonomics Cost Benefit Calculator – The Puget Sound Chapter of the Human Factors and Ergonomics Society has developed an Ergonomics cost-benefit calculator that helps you to estimate ROI by comparing three intervention options that offer estimates of benefits and payback periods.
Diabetes cost – The Agency for Healthcare Research and Quality (AHRQ) has created Diabetes Cost Calculator for Employers, an evidence-based tool that employers can use to estimate how much diabetes costs them and the potential savings that would result from better management of diabetes. In a similar vein, see Blueprint for health, a free web-based tool for making value-based decisions for health and productivity management. This tool was developed by the Health as Human Capital Foundation in collaboration with ACOEM, and the National Business Coalition on Health (NBCH).
R.O.I.Wellness Return on Investment Calculators are designed to help you to estimate the effect that a good wellness programs can have on health care costs, absenteeism, and presenteeism. For another tool variation on the theme of wellness program ROI, see the Calculate your Savings.
The cost of doing nothingQuantifying the Cost of Physical Inactivity Calculator estimates the financial cost of physically inactive people to a particular community, city, state or business. The site also provides companion resources and information to re-allocate resources and plan for healthier workplaces and communities that are more supportive of physical activity.

Cavalcade of Risk, NZ style

Wednesday, December 14th, 2011

Our favorite “down under” blogger Russell Chatswood has posted the latest and greatest issue of Cavalcade of Risk at his Chatswood moneyblog. Now despite the mild weather we are enjoying right now in the northeastern U.S., we are envious of Russell’s blooming garden, as evidenced by the photos in the post. And beyond the flora and fauna, there is your garden variety biweekly grab bag of risk-related posts from around the blogosphere. Check it out.

Cavalcade of Risk, debt downgrades & other news briefs

Wednesday, August 10th, 2011

Jason Shafrin, our favorite Healthcare Economist, is hosting this week’s digest of risk-related posts Cavalcade of Risk #137: Risk Grabs the Headlines. Check it out!
S&P Downgrade Robert Hartwig of the Insurance Information Institute weighs in: Understanding the U.S. Debt Downgrade: No Significant Impact on Insurers: “The nation’s property/casualty insurers have very limited direct exposure to the U.S. government bond market and have collectively set aside hundreds of billions of dollars to pay unanticipated claims,” said Dr. Robert Hartwig, president of the I.I.I. and an economist. “Both of these factors will enable the industry to operate effectively despite the recent downgrade of long-term U.S. bonds.” Consequently, Hartwig added, “Existing policyholders, people and businesses filing claims and those seeking to purchase insurance will not experience any difficulties arising from the downgrade.”
Related:

Lingering effects10 Years and a Diagnosis Later, 9/11 Demons Haunt Thousands – “One measure of the psychological impact of 9/11 is this: At least 10,000 firefighters, police officers and civilians exposed to the terrorist attack on the World Trade Center have been found to have post-traumatic stress disorder, and in a kind of mass grieving, many of them have yet to recover, according to figures compiled by New York City’s three 9/11 health programs.”
One year ago… – Last week marked the anniversary of the shooting Hartford Distributors in Manchester, Connecticut. Here is a link to our post about the event, in which we discussed some of the comp-related aspects of the case and whether employer’s can take measures to inoculate against such events.
Not-so-friendly reminders department – Employers should be aware that workers’ comp related retaliation can get expensive. But that is chicken scratch next to the penalties that might be imposed for things like failure to carry work comp insurance, misclassifying employees, and violating stop work orders.
OSHA toolPlanning Ahead for Hot Weather: Employer Checklist.

Remembering Two Prominant Risk Takers

Thursday, June 30th, 2011

We are about to observe the 235th anniversary of the Declaration of Independence. As is so often the case with holidays, the ways we celebrate will not have much to do with the original events. As we indulge in a weekend of family reunions, sporting events, cookouts, libations and fireworks – along with hours sitting in traffic – we are unlikely to give much thought to the conditions that led to the promulgation of that remarkable document. So as we prepare to hit the roads, let’s take a moment to acknowledge two of the remarkable risk takers who helped make this all possible.
Let’s begin with John Adams. He trained at Harvard to become a minister, but chafed at being told what to believe and what to think, so he became a lawyer instead. On March 5, 1770, six years before the formal break from England, an unruly mob gathered in front of Boston’s Customs House. After pelting British troops with snowballs and rocks, the crowd surged forward; the troops fired into the mob, killing five people. From the colonial viewpoint, this was the “Boston Massacre.” As far as the British were concerned, it was a riot. Both views are credible.
Unpopular Cause
Captain Thomas Preston and 12 soldiers were charged with murder. No Boston lawyer would take their case, so the plea was made to John Adams, who at the time was practicing law (not all that successfully) in Quincy, about 15 miles from Boston. Adams took on the case, at considerable personal risk. His words at the time should be taken to heart by any politician seeking a vote:

“Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence.”

Under Adams’ skillful defense, six of the soldiers were acquitted. Two who had fired directly into the crowd were charged with murder, but were convicted only of manslaughter. Adams was paid eighteen guineas by the British soldiers, or about the cost of a pair of shoes. Beyond the fee, Adams wanted to prove to the world that American justice was balanced and fair.
Self-Evident Truths
Just six years later Thomas Jefferson wrote – and Adams helped edit – the Declaration of Independence. After ratification of the final language (which, to Jefferson’s chagrin, excluded a ban on the importation of slaves), a prayer was said and in silence the delegates to the convention applied their signatures to the document.
In the entire history of risk taking, there are few events of greater magnitude. The document would be considered treason by the most powerful government in the world; should the revolution fail – and that itself must have seemed highly likely – each signer would pay with his life, .
The Perspective of Time
One month before his death, Adams wrote of the upcoming July 4, 1826, festivities:

My best wishes, in the joys, and festivities, and the solemn services of that day on which will be completed the fiftieth year from its birth, of the independence of the United States: a memorable epoch in the annals of the human race, destined in future history to form the brightest or the blackest page, according to the use or the abuse of those political institutions by which they shall, in time to come, be shaped by the human mind.

Somber thoughts from one who was there at the beginning – and who would likely be appalled by some of the subsequent uses and abuses of his work.
As most Insider readers probably know, Adams and Jefferson both died on July 4, 1826, fifty years to the day after the Declaration was issued. Adams desperately wanted to outlive Jefferson; just before he died, he said – perhaps bitterly – “Thomas Jefferson survives.” Ironically, word had already gone out from Monticello that Jefferson had died earlier the same day. It is perhaps reassuring that such great souls could also be small minded and petty. There is still hope for us all.

Cavalcade of Risk #123 and assorted news notes from the blogosphere

Wednesday, January 26th, 2011

Get your biweekly fix of risk: Cavalcade of Risk #123: High-Yield Edition is now posted at The Notwithstanding Blog. There’s an eclectic roundup of posts and you might take the time to visit the host blog too – our blogger is a Canadian med student studying here in the U.S., and posts “tales from medical school, health policy analysis, critiques of the academic medical zeitgeist, and the occasional bonus Canadiana.”
Misclassification in Maine – analysts in the Maine Labor Department estimate that tax losses to the state resulting from misclassification could be as high as $36 million a year. As in many other states, lawmakers had been looking at establishing guidelines and rules for independent contractors. Newly elected Governor Paul LePage abolished the state’s misclassification task force that had been working on this initiative, stating that he would be introducing legislation based on the federal definition.
Union Demographics – Jeffrey Hirsch of Workplace Prof Blog gives us the latest report on union density for 2010: “Overall union density went down from 12.3% to 11.9%; in the private sector, union density went down from 7.2% to 6.9%, and in the public sector, it went from 37.4% to 36.2%.” See more detail at his post.
Vote for Workers’ Comp Notable People – Lexis Nexis announced the finalists in its Workers’ Comp Notable People 2010 – check it out and vote for your favorites. Voters can select two individuals from each of the three categories. The voting period runs from January 23, 2011 through February 4, 2011. Click here to join and vote in the LinkedIn Work Comp Analysis Group.
Food industryWorkersCompensation.com features an in-depth federal report on Injuries, Illnesses, And Fatalities In Food Manufacturing In 2008, which notes that “Workers in food manufacturing are more likely to be fatally injured and experience nonfatal injuries and illnesses than workers in private industry as a whole. Food manufacturing workers are also much more likely to suffer an injury requiring job transfer or restriction than one that requires days away from work.”
Underwriters – After reading an article on disappearing jobs, Jared Wade of Risk Management Monitor considers whether insurance underwriters are an endangered species now that technology can crunch the numbers.
Sign of changing times? – Roberto Ceniceros discusses how some of the large carriers are letting business walk rather than price it too low. With the combined ratio moving up, many industry analysts have stated that underwriting will make the difference between profit and loss and it appears that some insurers are taking heed.
Technology – Some workers comp insurers are adopting self-reporting options for payroll reporting for employers.
Quick takes

UPS At Risk: 37,500 Temps

Wednesday, December 22nd, 2010

This is a very busy time for delivery companies.Whether it’s the post office, UPS or FedEx, there are more packages moving around than people to handle them. The UPS solution is the hiring of 37,500 (!) temporary workers. These folks have been working for a few weeks and will continue working right up until Christmas Eve, when they will all be laid off. Due to the struggling economy, UPS had no trouble filling temporary jobs. This year, many laid off white-collar workers donned the drab brown uniforms and hopped on board delivery trucks, occupying the “jumper” seat next to the regular driver.
The Wall Street Journal has a nice article about this war-scaled ramp up (subscription required). As you can imagine, there is not a whole lot of time for training the new employees: a few tips on lifting “in the power zone,” a caution about getting into the truck (“three point contact”) and then off you go. The job is a frenzy of lifting, bending, carrying and climbing. These are physically demanding jobs, with relentless exertion required.
Risk Management Nightmare
Which leads to a loaded question for the risk managers at UPS: what percentage of this temporary workforce will be injured on the job? Even if it’s only one half of one percent, that would be nearly 200 people. In all likelihood, they will have been laid off before the claim has been filed. And once laid off, these temps will have no loyalty and no commitment to UPS. They will have already handed in their brown uniforms.
More troubling from a risk perspective, the types of injuries may be the most open-ended and expensive claims in the comp system: back, shoulder and knee injuries, slips and falls on ice (for most of the country it is, after all, a rather tough winter). Statistically, you can expect an occasional robbery or animal bite.
All business entails some risk. Hiring strangers is always risky, no matter how thorough the vetting process – and in this case, that process is foreshortened, to say the least. Placing thousands of temporary employees into physically demanding jobs increases risk exponentially.
So when you go home tonight and look for the packages you are expecting, think for a moment on the harried temporary employees who brought them to your door. And say a little prayer, that the New Year brings these former white-collar workers health, happiness…and a job once again suited to their hard-earned skills.

Cavalcade of Risk #116

Wednesday, October 20th, 2010

We are pleased to be hosting the biweekly Cavalcade of Risk. We thought we’d kick things off on a light note with these amusing ads from Bangkok Insurance that cleverly illustrate the concept of probability.

Insurance is based on weighing and measuring the odds, and protecting ourselves against those odds. You can consult this handy chart on the lifetime odds of death for selected causes to assess your risk. (And to cheer you, you can also check dead at your age to see which famous people you’ve already outlived.) But even when you know the odds, life can throw curve balls … clever insurers know this and use the unexpected to remind us to keep our policies up to date …

When real life outperforms the commercials…
As we delve into this week’s submissions, we see a few real-life examples of what can happen when people don’t pay-to-play in hedging against risks. Khaleef Crumbley at KNS Financial talks about whether pay-to-spray fees are good idea or not in his post about the recent TN case where firefighters stood by as a home – and the pets within – burned to the ground because the owner forgot to pay his annual $75 protection fee. This case was notable because it involved a public service, but Tred R. Eyerly of Insurance Law Hawaii posts another cautionary tale about paying fees on time – this one involving an insurance company. He discusses a legal case in which the court denied an insured’s claims against its flood insurer.
If you aren’t happy with your insurance coverage, Jeff Rose of goodfinancialcents offers 6 factors that make switching insurance companies and firing your agent all worth it. But if you are considering a switch in insurers, Nancy Germond of AllBusiness.com suggests that you not be too hasty and you don’t do it for the wrong reasons because cut-rate insurance may cost you much more.
And when considering insurance coverage, Silicon Valley Blogger reminds us about coverage to which we are often entitled but frequently overlook: Extra insurance coverage through credit cards: use those perks.
Miscellaneous perils
Henry Stern of InsureBlog notes that if you think those big old Bel Airs of your parents’ day were safer than today’s econoboxes, think again. He offers compelling video evidence in his post Retro Risk Reduction. And while on the topic of transportation risks, we point to our own post on a rather unsettling mater: the sorry state of medical certification of commercial drivers and other public transportation regulatory issues.
Ironman at Political Calculations cautions that you not let technological advances leave you in the dust. He offers a cool tool to help you assess whether you are keeping up: When will you become obsolete?. But while technology advances offer opportunities, they are not without their own risks. Emily Holbrook of Risk Management Monitor posts that if we find ourselves in a courtroom, social media has increased our risk for an unfair trial.
Sometimes our risk comes from quarters where we least expect it. We’ve all been alerted to the dangers of identity theft – but usually we expect the danger to be from strangers. Wenchypoo of Wisdom from Wenchypoo says that the danger is sometimes all in the family. She posts on the strange phenomena of parents stealing their kids’ identities.
Risk management & health care
David Williams of Health Business Blog tells us that reducing the use of head CT scans for certain kids can reduce cancer risk, improve customer service and maintain quality. The only new risk is to reimbursement: Fewer scans often mean less revenue for the provider organization.
Speaking of kids, Louise of Colorado Health Insurance Insider suggests a real-world compromise for child-only policies, which would offset the increased risk that insurers take on in guaranteed-issue, open enrollment periods for child-only policies.
If you haven’t heard about accountable care organizations(ACOs) yet, click on over to Healthcare Economist. Jason Shafrin talks about why providers love ACOs. Hint: it may be less about improving patient outcomes and more about market power.
Jaan Sidorov of Disease Management Care Blog offers 10 reasons why health insurers that offer fully insured products are unlikely to offer work-site wellness programs anytime soon – despite their cost saving potential.