WC Injury Frequency Still In Free-Fall

Experts disagree on cause of decline in number of claims facing carriers

The frequency of workers' compensation injury claims has been decreasing for over a decade, and in the opinion of one expert, factors are in place now that ensure it's a trend that won't ever stop.

Other researchers and economists might have doubts, but Barry Lipton, practice leader and senior actuary for the Boca Raton, Fla.-based National Council on Compensation Insurance, makes the case that forces are there to create never-ending improvement.

“You will never get it down to zero,” Mr. Lipton said, but in his view continually better frequency rates are possible in much the same way that the nation's mortality rate is enhanced every year by factors such as improved auto equipment.

While there may be some upticks in the number of claims, Mr. Lipton said, “we still believe every 10 years [accident frequency] will likely be lower.”

Explaining the forces he sees in place to support his prediction, Mr. Lipton pointed to the fact that historically there had been claims increases during periods of economic expansion as new workers who were unfamiliar with the job were put on the payroll. However, most recently–during the boom times of the 1990s–when hiring surged, claims did not.

Mr. Lipton attributed this to an intensified focus on workplace safety as well as other factors that turned up in interviews with risk managers of large corporations.

At Wal-Mart, he said, the risk manager explained that close inventory management the firm now uses means less lifting and moving of goods, adding there is also more mechanization.

Additionally, Mr. Lipton noted economic pressure on employers to improve year after year, remarking that “one of the biggest ways to improve efficiency is to lower workplace injury.”

Workers' comp injury frequency is “the great success story,” he declared. According to NCCI figures, although average claim costs have risen during the period between 1997 and 2002, the number of claims under $2,000 declined 51 percent in that period, while those between $2,000 and $10,000 fell 26 percent, and those over $50,000 declined 4 percent. For 2003, it was estimated that total claim frequency was down 3 percent.

William Wiatrowski, assistant commissioner with the Federal Bureau of Labor Standards–which tracks safety and health statistics–said the rate of employee illness and injury since the mid-1990s has gone down for all major industry groups.

Even so, most researchers–while agreeing with Mr. Lipton's analysis of the forces creating the downward frequency trend–are unwilling to predict a non-stop decline.

Richard J. Butler, professor of economics at Brigham Young University in Provo, Utah, comments that in the past 15 years a lot of the more dangerous jobs have been “increasingly outsourced and sent overseas.” However, he added, “that's not going to continue forever.”

He agreed with Mr. Lipton that U.S. companies look at compensation injuries as an important part of their costs, and where they were once the sole responsibility of human resources staff, they now have the attention of chief executives and financial officers thanks to stiffer economic competition from companies around the world.

Looking ahead, Mr. Butler sees the injury rate continuing to lessen as long as technology improves, but ultimately, he added, “Who can predict?” Is an endless decline possible? “I don't think so,” he said.

William G. Johnson, an economics professor at Arizona State University's W.P. Carey School of Business in Tempe, Ariz., recently took part in a government study that looked at the coming impact of the baby boomer population bulge on health care utilization and disability incidence.

Mr. Johnson said no one has looked closely at how that group of aging workers–with a high frequency of back pain and chronic health problems–will affect the comp injury mix. The first impact of this wave “will be in place by 2010. We initially thought it would be 2020,” he noted.

Mike Helvacian, owner of M&H Consulting–a workers' comp research firm in Englewood Cliffs, N.J.–said while there is a variety of evidence as to what might be reducing frequency, it is not conclusive and the reasons remain theoretical.

Among the possible factors, he noted, is a move by more companies to self-insurance and large-deductible workers' comp polices. As a result, he said, some of the frequency decline might just be “a reporting issue.”

“It could be partly data they are not reporting, or they are investing more in safety,” Mr. Helvacian suggested.

He noted that even as there has been a drop in manufacturing jobs–which are viewed as riskier–there has been growth in construction jobs, yet frequency in that risky sector has been on the decline.

However, Mr. Helvacian said he has seen numbers indicating that in some states, permanent partial disability claims have started to increase, “and that is the component that affects system costs most. It doesn't come from permanent injuries or fatalities. It's what drives the system costs.”

Looking ahead, however, he said there is nothing on the horizon that indicates the frequency trend will reverse, “but until we can understand what's causing it to go down, I don't think we can say it will go down forever.”

Is there a bottom point to the decline? “There certainly is, and there is also a cyclical component to claims frequency,” added John D. Worral, chairman of the economics department at Rutgers University in Camden, N.J., and former chief economist at the NCCI.

The trend has been continuing down in an unprecedented way, he said, but “can it continue forever? No.” So, when might things turn around? “I really can't say. I don't have the data. It's a tough process to forecast,” he added.

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WC Injury Frequency Still In Free-Fall

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