NU Online News Service, Feb. 1, 3:06 p.m.EST

The public risk management sector, hit hard by the economicdownturn, will see belt-tightening a while longer as positivechanges in the economy take hold, according to a workers’compensation and risk management expert.

The public sector will start to turn around, but there is a lagtime, said Mark Walls, assistant vice president, claims with SafetyNational, an insurance carrier based in St. Louis, Mo. Once jobsare created, more people are working and taxes begin to flow, hesaid, and “eventually there is more money for the municipalities,but all these other things have to happen first.”

For many public entities so far, he said “the situation hasn’timproved that much. You still have states that are strugglingfinancially.”

To get the most for their money when buying insurance, somemunicipalities pool their workers’ compensation coverage. While inmany states large municipal risk sharing pools help keep costsdown, “they have gotten the prices about as low as they are goingto go” for workers’ comp, he observed.

While many factors are driving workers’ comp costs higher, thenumber one cost-driver is medical expenses, Mr. Walls said. Henoted that this is a trend that “isn’t going anywhere any timesoon.” In fact, he said, about 60 percent of all workers’ compdollars are medical.

“Medical inflation is higher than general inflation and thatseems to be even higher in the workers’ comp environment,” he said.“That’s an aspect that is very difficult for the average employerto make an impact on.”

While keeping injuries down is key, he said it’s also important,in states where the employer has medical control, to select thebest possible physicians to treat their workers, to get the bestpossible results and outcomes on claims.

For risk managers, while they may need to prepare for theeventuality of higher prices, they “can’t lose sight of losscontrol/injury prevention,” Mr. Walls warned. “The biggest part ofcontrolling claims costs that risk managers can do is [to] preventthe claims from happening in the first place. They have to keepthat focus and not lose track of it.”

Unfortunately, however, when the economy is tough and “everybodystarts cutting back,” it’s not uncommon to see risk management—inboth public and private sectors—be one of the areas to get cut.

“It’s not producing income, so they sometimes combine HR andrisk management, which limits the focus on the risk managementpiece,” Mr. Walls said.

He said risk managers should make their case and let theiremployers know their value. Organizations, public and private,“definitely need to invest in risk management and loss prevention,”Mr. Walls said. “I hope that as the economy starts to rebound wewill see an increased focus on risk management from employers. Wedid see some layoffs in that sector over the last few years.”