Pay Attention to Workers Comp Now, or Pay Later
After eight years of declining rates for commercial insurance, the end zone is in sight.
Recent data collected from risk managers and insurance buyers for the RIMS Benchmark Survey show workers comp has risen the most of the four major lines—more than 2.1% in the third quarter of 2011.
This comes as no surprise. From 2000 to 2010, the average indemnity cost of a loss-time claim grew 47%, to $22,300, says the National Council on Compensation Insurance (NCCI). And the medical portion grew even faster during the same period, up 95%, to $27,700, according to the NCCI.
While no one is predicting a hard market for workers comp just yet, insurers and brokers say it’s time to heed the warning signs and tighten up. There are two ways to do this: Either have fewer claims or handle them promptly so they don’t linger and become indemnified.
John O’Connor, vice president of product and platform for Travelers small commercial insurance, advocates “front door management,” which means making sure you get the right employees in the first place and then train them properly.
Travelers, with a century devoted to workers comp, offers policyholders a Web-based pre-employment screening tool that measures attitudes and personality traits associated with safe job performance. But O’Connor says businesses should also vet candidates with background checks, discuss previous work experience and follow up on references.
Motor vehicle records (MVRs) are an invaluable management tool for employers whose business includes transportation, particularly since most fatalities resulting in workers comp involve traffic accidents.
“An MVR will verify that your prospective driver has a current, valid operator’s license and a satisfactory driving record,” says O’Connor.
Once on the job, O’Connor says the key is proper risk management training from day one. “This can be as simple as making sure employees making deliveries know company policy is to buckle seat belts or understand how to properly lift heavy objects,” he says. O’Connor feels that management should be rewarded for stressing training, particularly for summer help. “Seasonal hiring means that some businesses will bring on employees who have less experience,” he says. “Workers under 30 years of age comprise almost one third of those sustaining on-the-job injuries and, on average, employees in their first year on the job will have a higher incidence of injuries than those with more tenure.”
Over the past two years, brokerage Aon has put together an Early Claim Identification (ECI) program to stop workers comp medical claims from turning into more-expensive long-term disabilities. The average cost per claim to compensate an injured worker for both medical care and lost wages is about 45 times the cost of medical-only claims, according to the NCCI.
By examining thousands of old claims, ECI found “seemingly simple claims” that became complicated and led to larger-than-expected losses. The program used this data to spot new claims on the same trajectory and prevent them from becoming more expensive.
Instead of handling flagged claims with support personnel who supervise payment to doctors and close out the claim after 90 days, Aon recommends using experienced adjusters who send these claims to doctors who specialize in these injuries and understand workers comp. The claimant often benefits by getting immediate therapy.
Experienced adjusters will also investigate the red flags, such as an employee who’s been on the job only a week but already has a repetitive stress injury, unwitnessed accidents, soft tissue and back injuries or an injury that “could have” happened at work.
“You need to move quickly,” says Paul Braun, managing director of casualty claims for Aon Global Risk Consulting. “In some states, once a medical claim runs a certain length of time, you can’t challenge it. And if you keep a claim that should go to disability as medical for too long, you waste a lot of money.”
Braun says that for some Aon clients, ECI has reduced the cost of workers comp by 15%.