According to the National Council on Compensation Insurance (NCCI), the recession beginning in 2007 and economic conditions since then has changed the frequency of workers’ compensation claims.
Insurance carriers and risk managers concern themselves more with frequency than severity because the more incidents that occur, the more likely one will be catastrophic, or at least severe.
In 2010, according to NCCI, claim frequency increased for the first time since 1990. Claim frequency dropped the next two years and has been level since.
Interestingly, the frequency measurement is lost time claims per one million dollars in pure premium. The question becomes: are payrolls or rates increasing fast enough to reduce the number of employees required to generate one million dollars in pure premium? The long-term result of good safety management has certainly brought the incident rate down in manufacturing and construction.
How is the 2010 anomaly explained? Were salaried-exempt workers hours expanded to the point of worker exhaustion? People with jobs required to work too many hours, or were people preoccupied with non-work items? Maybe the average salary dropped, causing the frequency per hour worked not to change, but the lost time per million dollars of premium to increase. Was it just an anomaly?
2010 was also the start of more employees becoming independent contractors. Could this fact tweak the statistics?
As employees become independent contractors, more one-person firms come into existence. This arrangement is the toughest for workers’ compensation carriers to price. Very little loss control exists in small firms, but the employees also cannot afford to miss work.
The long-term trend has been better loss control and a safer workplace with larger employers. The shorter-term trend has been smaller employers, and more part-time employees, which drive the cost of safety training up.
It’s worth following these trends for the next few years.
