2 reasons why workers’ comp premiums may be rising significantly
November 23, 2010 by Fred HosierPosted in: In this week's e-newsletter, Latest News & Views, Workers' comp, cost of safety
Some surprising news from workers’ compensation providers may lead to higher premiums in the near future.
Liberty Mutual Group, the nation’s largest workers’ comp insurer, says companies are reporting more employee injuries, which is the opposite of what normally happens during a recession.
Normally during an economic downturn, companies lay off less experienced workers who are more likely to get injured.
But claims data gathered by Liberty Mutual Group show injury frequency is edging up.
George Neale, Liberty Mutual’s executive VP and general claims manager, says it’s too early to tell what’s driving the increase.
Meanwhile, Liberty Mutual’s CEO is quoted in The Wall Street Journal as saying that workers’ comp is a “time bomb” for insurers.
Edmund Kelly said workers’ comp is largely unprofitable while inflation is low.
Kelly said Liberty Mutual is “willingly reducing our exposure” because of concerns about inflation come 2014 and 2015.
That means the company is less likely to issue workers’ comp policies in some cases, which may have the effect of driving up premiums with less competition.
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November 23rd, 2010 at 7:19 am
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November 23rd, 2010 at 4:13 pm
After reading this article it occures to me that if companies are laying off employees, the remaining employees are under considerbly more stress. The extra stress could cause employees to be less attentive while doing their work thus leading to more accidents.
November 26th, 2010 at 4:27 pm
I believe that we will see that the reasons for these increases are three fold. First there are many companies that offered buyouts of workforce members in efforts to reduce the higher end of the salary spectrum. This ends up taking a significant portion of the senior employees with a vast amount of institutional understanding. Those who are left may not recognize why procedures are in place or the how they came to be implemented. Then comes the second likely cause for the problem.
Since with EH&S it is difficult to judge the successes (how many injuries did we PREVENT today) and easy to document the failures, more companies are reducing their EHS contingents in efforts to cut costs. Basically they are using hope as a management strategy and employee recognize this, whether overtly or not. When the employee sees that the company is reducing its support of safety, or there are less personnel to audit the programs. Suddenly there is less incentive to follow the established plan.
I believe that the final nail in the coffin are these facts combined with the stress of not knowing whether they will remain employed. They are seeing reductions in work force and know plenty of other people who are in this situation. In this climate nobody wants to be the crybaby or the snitch so they turn the other cheek. Plus you are seeing people hired at lower wages than they may be accustom to receiving which adds resentment toward the employer.
I also would not be surprised to see that some of these costs are actually related to off work injuries that are being brought forward as a result of lost or reduced healthcare benefits. In times like these fear runs deep and unfortunately employees will assume that safety is not as important as having food on the table unless management makes a strong, overt commitment to safety.
November 30th, 2010 at 8:52 am
I am seeing an increase in injuries across my locations in the US. As employees fear losing their jobs they think if they file a claim we can not fire them. I have received several blind applications as well. Most employees know if they retain council they will get some type of cash award.
November 30th, 2010 at 9:58 am
Who said that Workers Comp had or should be a “profitable enterprise”. That is a very damning statement of the whole system. It is my belief that W/C providers are spinning this thing as best they can to increase profit alone. Most of the companies that I know of have vastly improved their safety programs as a course of growing their business, not that renegade operations are not out there. I would venture to say, that if they are basing their assumptive reasoning on frequency rates they are off base. For example I have a plant that has 10 employees, if they have one injury for 10000 manhours, the rate is: 20.0. If I have 30 employees that work 100000 hours and have one injury the rate is: 2. Both cases, 1 injury, but the first scenario the TRFR is 20, the second is 2. So, I believe they are spinning the wrong statistic, they should be looking at total injuries, after all, they do not get involved unless someone is injured, and a rate does not indicate the number of injuries….I truly believe they are seeing less injuries, not more, as it makes sense with the high unemployment, layoffs, and slow economy - there would be fewer injuries related to work…
November 30th, 2010 at 10:40 am
DMac - Unfortunately, insurance companies, like all companies, like to make a profit on their products. They, like all companies, want to keep their costs (insurance payouts, among other things) low, and charge as much for their products as the market will allow, so they can take money to the bottom line and pay their executives exhorbitant salaries and bonuses.
November 30th, 2010 at 10:52 am
I have trouble getting them to close the claims. The longer the claim stays open the more money they make. I have to constantly badger them to get the claims closed
November 30th, 2010 at 2:18 pm
Jan - It depends on your state’s laws, but in some even if a case is closed it can be re-opened if additional costs are incurred.
November 30th, 2010 at 4:17 pm
I have 56 locations across the US - it is IL I have the most trouble with closing the claims. These are simple open and shut claims that they leave hanging out there. They make their money based on how many open claims they have so I have to stay on top of it.
January 1st, 2011 at 3:58 pm
Washington state has this challenge with increasing costs. Reasons are many. There are fewer workers paying into the state fund so there is less available money. The returns on the invested money are less because the economy is poor and returns are low. The costs of medical help keeps skyrocketing, and on and on.
January 3rd, 2011 at 11:22 am
In our company, we have seen the same sort of thing that Jan mentioned. We had a lot of workman’s comp claims as we were having to scale back our manpower. And the claims were questionable at best, but hard to disprove. There were a lot of people with soft tissue injuries suddenly. They figured we couldn’t let them go if there was an open workman’s comp claim on them…