National Council on Compensation Insurance (NCCI) analyzes developments in
costly workers' compensation claims
The NCCI reports that almost one-third of all rapidly increasing claims originate in the construction industry. Traumatic brain injury, burns, severe spinal cord injuries, and traumatic fractures are common results of falls from heights or car accidents.
For obvious reasons, there is a considerable interest in large claim trends. These trends can be disastrous for the injured worker and can have substantial ramifications for carrier operations.
Workplace Injuries- Less than 0.5 percent of all claims for lost time are comprised of accidents at work that result in significant compensation, as defined by an expense total that is greater than one million dollars. Nonetheless, they have a very disproportionate influence on losses, accounting for up to 15% of the entire indemnity and medical costs incurred by the system of workers' compensation.
According to recent findings from the National Council on Compensation Insurance (NCCI), claims of more than $1 million can be roughly divided into two categories: (1) quickly developing claims that reach the $1 million mark within two years, and (2) slowly emerging claims that reach the $1 million mark two years after injury or later. Large claims were broken down into three groups so that NCCI could see distinct variations and noteworthy trends.
Approximately 25% of big claims that take longer to emerge are associated with the construction industry, with a significant portion stemming from the use of motor vehicles and the installation of machinery and equipment. The occurrence of slow claims often stems from the exertion or trauma experienced while lifting activities, leading to the development of lower back strains. Approximately 25% of these injuries lead to either fatality or permanent complete disability.
The occurrence of the Great Recession resulted in a substantial decline in the construction sector, leading to a significant reduction of over 30% in the proportionate occurrence of substantial claims during the timeframe spanning from 2008 to 2012. From 2012 forward, there has been a consistent annual drop of approximately 2% in the incidence of big claims relative to lost-time claims.
Deconstructing that trend reveals a 4.8% decrease in slow-emerging claims, which is driven in part by a decrease in diagnoses of disc degeneration and discomfort. The drop in slow-emerging claims is partially compensated by an increase in the severity of major claims, specifically burns, spinal cord injuries, and traumatic brain injuries, which have all seen an increase.
Due to the nature of the damage, rapidly developing claims that are significant frequently require intensive acute care. When compared to the average slow-emerging claim, which comes in at $1.6 million, the average fast-emerging claim will require more than $3 million in indemnity and medical expenditures. The average cost of indemnification for fast developing claims and delayed emerging claims is the same: $70,000. Therefore, the key factor that contributes to expenses is the evolution of medical therapies throughout time.
At the outset, the most significant portion of total medical costs is attributable to hospitalization. Burns, spinal cord injuries, and traumatic brain injuries are fast-emerging
injuries that require a higher percentage of home health care services, whereas medical payments for slow-emerging claims are mostly for prescription drugs and medical equipment. As treatments for the injured worker proceed, the injured worker will require more home health care services. In order to effectively evaluate the effects of inflation on big claims over a prolonged period of time, it is essential to identify the mix of medical services that are being provided.
It is essential to identify the cost drivers for significant claims. A large claim is sometimes defined by durations that span multiple years or even a lifetime. This can lead to compounding uncertainty, which is propelled by high severity, inflationary pressure, changes in utilization, and changing medical conditions that are all taken into consideration by an actuary when making an estimate.
Source: P&C Journal