Broker Urges Focus On Comp Claim Severity
With frequency declines bound to level off, Marsh official worries about soaring costs
Orlando
The nation needs to put more focus on the severity of workers' compensation claims because recent declines in frequency cannot be sustained forever, a leading brokerage official here warned.
The alarm was sounded by Stan Long, chairman of the Marsh Workers Compensation Practice, during his keynote address at the annual Workers Compensation Educational Conference. Mr. Long's speech launched the national trends track at WCEC, put on by The National Underwriter Company, parent of this magazine.
Noting that there has been a 10-year decline in frequency, he asked rhetorically, "What happens when that levels out?" He suggested there could be problems ahead if frequency starts to rise and the industry has done nothing to address the severity issue.
He cited figures from the Florida marketplace that in recent policy years the average medical payment per claim has risen 16 percent. Comparing the average medical payment for claims with seven days lost time, he noted that Florida at $6,755 was among such high states as California at $6,717 and Texas at $9,314.
The average number of medical visits for such claims in Florida is 21, compared to 33 in California and Texas, he noted.
New York, he said, would be included in the ranks of the top states with poor outcomes. However, New Yorks methods of record keeping make complete comparisons difficult, he noted.
If average medical costs continue to surge, he warned, "youre headed for real trouble on an ultimate [cost] basis."
Another factor cited by Mr. Long is a lack of follow-up on claims. He explained that in doing a file review of high-cost cases, he found that one thing they had in common was that a thorough investigation was not done to confirm the claim's legitimacy.
Mr. Long said corporate insurance buyers are missing the point about the importance of return to work efforts in managing the costs of employee injuriesnot just workers' comp coverage, but in the impact on productivity as well. Almost 100 percent of companies have economic incentives for managers who meet production goals, but incentive "for return to work is a fraction of one percentile," he noted.
Supervisors who keep employees at work ought to be rewarded, he added, asserting that the answer to the spike in the severity of injuries is better, more proactive management.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 3, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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