Unprecedented Severity Of WC Claims (Insurance Thought Leadership )

Unprecedented Severity Of WC Claims

  Tuesday, March 7th, 2023 Source: Insurance Thought Leadership

There seems to be a common misconception that all workers’ compensation losses are flat to slightly improving. While that might be true for the frequency of smaller claims, it definitely is not the trend in the frequency and costs of large death and permanent total disability claims.

‘Over the last three years, Safety National has seen frequency of severity like we have never seen before. This includes a 30% increase in claims with incurred over $10 million, along with a rise in claims with incurred of $5 million to $10 million,’ said John Csik, president of Safety National.

‘Although these large claims are infrequent, when they do occur, the costs are high and continue to escalate. This is definitely a trend that should be on the radar of every broker and risk manager because, eventually, these costs impact premiums.’

Bureaus such as NCCI and WCIRB focus their research on the first-dollar market, which is composed of a high percentage of small employers. These bureaus cap loss severity in their analysis and exclude claims that are open past 10 years.

This approach does not accurately account for the long tail development and payout associated with catastrophic claims, which continue well past 10 years. In addition, self-insured employers that represent a significant percentage of the U.S. workforce, especially in segments such as public entities, hospitals, educational institutions and large employers, generally do not report loss information to the NCCI or state rate-making bureaus.

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