Small workers' compensation claims continued to drop in frequency last year and, in something of a surprise, large and medium-sized claim frequency dropped as well.

Those were among the key findings in a research brief released yesterday by the National Council on Compensation Insurance in Boca Raton, Fla.

Among the factors impacting this trend, NCCI said, has been low growth in wage rates.

NCCI noted that the continuing decline in frequency–an ongoing trend for the past 15 years–was not a surprise to industry observers. “What may be surprising, though, is that the decline now seems to be just as prominent among the medium and large claims as it is for the small claims,” NCCI said. “This is somewhat unexpected since past studies have shown the frequency decline was much more pronounced for the smaller claims.”

The claim frequency drop for large claims has meant increases in severity of claims is lower as well, NCCI said, adding that this is particularly true for wage replacement or indemnity.

An easing in growth of indemnity severity, NCCI said, reflects limited growth in wage rates during the weak labor market during and following the recession of 2001.

Other findings listed as key were:

o Over the last five years, significant declines occurred for all injury types.

o Reductions occurred in claims for all major industry groups and almost all occupations.

o After accounting for both claim frequency and severity, premiums by industry group are equitable.

o A shifting occupational mix away from riskier jobs is a minor contributor to the decline.

NCCI's study found medical costs per claim have continued to rise, with 9.1 percent the average boost over the past four years. Increased medical costs and more utilization of medical treatment services–including prescription drugs–were reported as a main cause of the rise.

During 2001, the decline in frequency was 10.3 percent for the smallest claims of less than $2,000, while for those large claims over $50,000 the decrease was only .4 percent. However, for 2004 the downward frequency change for the largest claims was 6.8 percent, and for the smallest 3.7 percent.

As a result, NCCI said, “high-cost claims are now sharing equally in the claim frequency decline.”

Examining type of injury, NCCI said that all types–whether minor or severe–saw a significant decrease in the past five years.

NCCI said a look at industry groups found a frequency decline of 12 percent for office and clerical categories, and 20 percent for contracting.

The study found contracting has the least amount of claims when measured against premium, and employees in the goods and services category now have the most.

However, contracting, while having the fewest claims per $1 million of premium, was found to have the highest severity of any industry. Goods and services had the highest claims per premium rate.

“We seem to be in an unusual period of high decline in the last 10 years,” said Tony DiDonato, senior actuary and director at NCCI–that is, higher than the usual average drop of 1.5-to-2 percent over the last few decades, he noted.

He said there is no “smoking gun” behind the drop, but the primary driver may be more efficiency and automation that limits physical activity in the workplace.

Special Reports /

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