High Levels of Worker Stress Erode Workplace Safety
As the nature of work changes at break-neck speed, job stress poses a threat to workers and their employers, the National Institute for Occupational Safety and Health reports. “It is widely believed that job stress increases the risk for development of back and upper extremity musculoskeletal disorders.” And although additional research is necessary, NIOSH says there is growing concern that stressful work conditions interfere with safety practices and set the stage for accidents.
Meanwhile, the infographic above compiled by the American Psychological Assn. earlier this year shows that, on average, Americans’ stress levels are far higher than they believe is healthy.
Indemnity Claims Up for Calif. Private Self-Insured Employers
In 2013, private self-insured companies registered the biggest increase in indemnity claim frequency in the past 10 years, according to a new report. At the same time, the incidence of medical-only claims declined.
Otherwise, the latest reports show “virtually no change in claim frequency in 2013.” Also flat was the average paid and incurred amounts per claim noted in the first reports for 2013 compared to the previous year.
The summary by the California Workers’ Compensation Institute is based on data compiled by the Office of Self-Insurance Plans. It reflects the experience of private self-insured employers who covered nearly 2.09 million California employees last year — down from 2.12 million employees in the 2012 initial report.
“The number of workers’ compensation claims reported by California’s private self-insured employers was down about 2 percent in 2013,” the summary says, “but for the fifth year in a row, private self-insured claim frequency was flat, as a marginal decline in the medical-only claims rate was offset by a slight uptick in the indemnity claims rate.”
There were 76,015 private self-insured claims last year — 1,542 fewer claims than in the 2012 initial report. However, “with the number of covered employees down, the private self-insured claim frequency rate held steady,” the report explains, “coming in at 3.64 claims (2.22 medical only and 1.42 indemnity) per 100 employees — almost identical to the 2012 rate of 3.65 claims (2.33 medical only plus 1.32 indemnity) per 100 employees.”
Looking at aggregate claim frequency rates from 2004-13 shows most of the decline in frequency occurred after the 2002-04 legislative reforms. For the last nine years the frequency rate has remained below 4 claims per 100 covered employees, the report says. Most of the fluctuation reflects changes in medical-only claim frequency even though “in 2013, indemnity claim frequency registered the biggest increase in the past 10 years while the incidence of medical-only claims declined.”
The OSIP data shows the number of indemnity cases reported in 2013 was 29,573 — up from the 28,065 cases in 2012 and higher than the 29,026 cases reported in 2011.
In terms of loss payments, the total as of the end of last year for private self-insureds was $180.9 million, or 2.8 percent less than in 2012. The total incurred — paid losses plus reserves for future payments — was 580.5 million for 2013, about 14.1 million or 2.4 percent lower than the initial incurred amount reported for 2012 claims.
CWCI’s analysis of more developed data confirms that reductions in average loss per claim combined with lower claim volume to push losses to a post-reform low in 2005. “By 2006, however, both average paid and average incurred losses began to trend up sharply, driving up private self-insured’s total losses even as claim volume continued to fall,” the report explains.
Global Program Premium Allocation: Why It Matters More Than You Think
Ten years after starting her medium-sized Greek yogurt manufacturing and distribution business in Chicago, Nancy is looking to open new facilities in Frankfurt, Germany and Seoul, South Korea. She has determined the company needs to have separate insurance policies for each location. Enter “premium allocation,” the process through which insurance premiums, fees and other charges are properly allocated among participants and geographies.
Experts say that the ideal premium allocation strategy is about balance. On one hand, it needs to appropriately reflect the risk being insured. On the other, it must satisfy the client’s objectives, as well as those of regulators, local subsidiaries, insurers and brokers., Ensuring that premium allocation is done appropriately and on a timely basis can make a multinational program run much smoother for everyone.
At first blush, premium allocation for a global insurance program is hardly buzzworthy. But as with our expanding hypothetical company, accurate, equitable premium allocation is a critical starting point. All parties have a vested interest in seeing that the allocation is done correctly and efficiently.
“This rather prosaic topic affects everyone … brokers, clients and carriers. Many risk managers with global experience understand how critical it is to get the premium allocation right. But for those new to foreign markets, they may not understand the intricacies of why it matters.”
– Marty Scherzer, President of Global Risk Solutions, AIG
Basic goals of key players include:
- Buyer – corporate office: Wants to ensure that the organization is adequately covered while engineering an optimal financial structure. The optimized structure is dependent on balancing local regulatory, tax and market conditions while providing for the appropriate premium to cover the risk.
- Buyer – local offices: Needs to have justification that the internal allocations of the premium expense fairly represent the local office’s risk exposure.
- Broker: The resources that are assigned to manage the program in a local country need to be appropriately compensated. Their compensation is often determined by the premium allocated to their country. A premium allocation that does not effectively correlate to the needs of the local office has the potential to under- or over-compensate these resources.
- Insurer: Needs to satisfy regulators that oversee the insurer’s local insurance operations that the premiums are fair, reasonable and commensurate with the risks being covered.
According to Marty Scherzer, President of Global Risk Solutions at AIG, as globalization continues to drive U.S. companies of varying sizes to expand their markets beyond domestic borders, premium allocation “needs to be done appropriately and timely; delay or get it wrong and it could prove costly.”
“This rather prosaic topic affects everyone … brokers, clients and carriers,” Scherzer says. “Many risk managers with global experience understand how critical it is to get the premium allocation right. But for those new to foreign markets, they may not understand the intricacies of why it matters.”
There are four critical challenges that need to be balanced if an allocation is to satisfy all parties, he says:
Across the globe, tax rates for insurance premiums vary widely. While a company will want to structure allocations to attain its financial objectives, the methodology employed needs to be reasonable and appropriate in the eyes of the carrier, broker, insured and regulator. Similarly, and in conjunction with tax and transfer pricing considerations, companies need to make sure that their premiums properly reflect the risk in each country. Even companies with the best intentions to allocate premiums appropriately are facing greater scrutiny. To properly address this issue, Scherzer recommends that companies maintain a well documented and justifiable rationale for their premium allocation in the event of a regulatory inquiry.
Insurance regulators worldwide seek to ensure that the carriers in their countries have both the capital and the ability to pay losses. Accordingly, they don’t want a premium being allocated to their country to be too low relative to the corresponding level of risk.
Without accurate data, premium allocation can be difficult, at best. Choosing to allocate premium based on sales in a given country or in a given time period, for example, can work. But if you don’t have that data for every subsidiary in a given country, the allocation will not be accurate. The key to appropriately allocating premium is to gather the required data well in advance of the program’s inception and scrub it for accuracy.
When creating an optimal multinational insurance program, premium allocation needs to be done quickly, but accurately. Without careful attention and planning, the process can easily become derailed.
Scherzer compares it to getting a little bit off course at the beginning of a long journey. A small deviation at the outset will have a magnified effect later on, landing you even farther away from your intended destination.
Figuring it all out
AIG has created the award-winning Multinational Program Design Tool to help companies decide whether (and where) to place local policies. The tool uses information that covers more than 200 countries, and provides results after answers to a few basic questions.
This interactive tool — iPad and PC-ready — requires just 10-15 minutes to complete in one of four languages (English, Spanish, Chinese and Japanese). The tool evaluates user feedback on exposures, geographies, risk sensitivities, preferences and needs against AIG’s knowledge of local regulatory, business and market factors and trends to produce a detailed report that can be used in the next level of discussion with brokers and AIG on a global insurance strategy, including premium allocation.
“The hope is that decision-makers partner with their broker and carrier to get premium allocation done early, accurately and right the first time,” Scherzer says.
For more information about AIG and its award-winning application, visit aig.com/multinational.