A trend is emerging that may put increased pressure on workers' compensation rates.

Over the past two decades, the workers' comp frequency trend has, with a few minor exceptions, been negative, which has helped to offset positive severity trends. But during the recent recession, the frequency of workers' comp claims began to rise. This trend was observed across all industry groups, with classes in the construction industry being particularly hard hit.

Liberty Mutual noted a rise of more than 5 percent in 2010 from 2009, and the National Council on Compensation Insurance reported an adjusted 3 percent increase during the same period.

The effects of this growth in frequency are compounded by several other recent trends, such as increasing medical inflation (which often has far exceeded the standard Consumer Price Index) and generally lower investment returns for insurers in recent years. Also, many experts fear current federal monetary policy may spark inflation.

All of these factors combined may put upward pressure on workers' comp pricing, as the gap between workers' comp premiums and costs grows and insurers seek to more accurately price policies in light of greater actual claim costs and current macroeconomic conditions.

In fact, a June report by Towers Watson noted that workers' comp rates already did increase modestly in the first quarter of this year, while rates for other commercial-insurance coverages stayed flat.

Brokers, agents, buyers and insurers should work closely together to fine-tune workers' comp programs to ensure both lower total program costs today—and an improved rate environment for buyers tomorrow.

COST-CONTROL SOLUTIONS

Two best practices are critical to controlling total workers' comp costs and effectively positioning a policyholder for rates that accurately reflect their experience.

The first is loss prevention. Prevent the injury, and the policyholder avoids the significant direct and indirect costs related to the workplace accident.

Start by understanding the types of workers' comp claims employees file. Rank them by their impact on the company. Identify what can be done to prevent the most expensive injuries. Build a business case for continued investments in workplace safety by showing the return on that investment, in terms of reduced claim costs and more favorable pricing.

The second best practice is to work closely with your insurer to manage claims and medical costs when a workplace accident does happen. Obtaining maximum medical improvement for the injury and providing return-to-work programs for the injured worker have been proven to provide the best outcomes for both the injured worker and employer.

Understand how the workers' comp insurer identifies the small number of claims that will drive total claims costs unless quickly given the right level of attention and resources. Review the impact of the tools used by the insurer to deliver quality medical outcomes cost-effectively, from selecting the providers most likely to deliver the best medical outcomes to reviewing bills to make sure they reflect appropriate billing practices and fee structures.

Rising workers' comp frequency provides a great opportunity for policyholders, brokers, agents and insurers to come together to make sure workers' comp programs are doing everything possible to manage total costs and protect employees.

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With Rising Workers&rsquo; Compensation Frequency, It&rsquo;s Time To Strengthen Programs Ahead Of Hardening Market

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With Rising Workers’ Compensation Frequency, It’s Time To Strengthen Programs Ahead Of Hardening Market