Experts See Closing Older Claims, End of Soft Market as Big Issues
Mark Noonan, managing principal, Casualty Practice, Integro Insurance Brokers, Boston.
The recession has had a bearing on return-to-work decisions among employers and put a new effort on closing older claims, Noonan says.
"There seems to have been a focus on trying to weigh the different issues and balance between headcount but trying to keep the RTW program in place; so people who are able to come back to work have a place to go," he says. "I saw some pretty creative things."
Rather than implement layoffs, some employers have implemented four-day workweeks. Employees in those companies did not lose their jobs or benefits.
"I thought that was a much more creative approach than saying, 'OK, we're taking 20 percent of our workforce out,'" he says. "As the economy comes back, that's a much better plan."
A focus on older workers' comp claims is another area that has changed because of the economy. Noonan says many companies are putting more emphasis on getting these claims off the books.
"A lot of times adjusters on older claims look at them only every 60 to 90 days," he says. "You focus attention on them and see if there are RTW possibilities; see what's happening on the medicals and try to accelerate closing them."
With the economy beginning to improve, Noonan believes the trend of reduced claims frequency will change. "The great majority of claims occur to people new in their jobs. So I anticipate we'll see frequency creep up a little bit, at least in the first part of the year."
Unlike some workers' comp observers, Noonan believes another potential driver to increased frequency will be federal health care reform.
"Most logic would dictate people file claims because they have no health insurance," he says. "I'm of the opinion it's because they understand the need and are comfortable going to the physician. So with more people having health insurance, some claims that were not filed will now be."
Jim Pocius, shareholder, Marshall, Dennehey, Warner, Coleman & Goggin, Philadelphia.
An improving economy that spurs employment will likely drive up frequency, Pocius agrees, which could mean the end of the soft market.
"As we're coming out of the recession and more people get back to work, we'll see claims start to rise again which will mean workers' comp costs will go up," he says. "As costs have gone up, we've combated that with decreasing frequency. So if costs are going up and frequency is going up, on a case-by-case basis, overall costs for workers' comp have to go up."
Also putting pressure on premiums may be medical advances, Pocius says, especially improved prosthetics.
"On the plus side, joint replacement parts seem to be getting more durable," he says. "We have physicians and manufacturers for hip, knee and shoulder replacements saying they may have life expectancy as long as 30 years, which would mean one replacement where you might have needed two or three."
Improvements in artificial limbs have resulted in hands and arms that are now computer controlled. That means a motorized hand can allow the patient to pick up a delicate object without crushing it.
"But what will the costs for that be?" Pocius says. "In all likelihood, hundreds of thousands of dollars."
The speculation translates to a likely hardening of the workers' comp market. "That is unless there's a change in the stock market. If investment income goes up, that could offset any increases in premiums."
Pocius says the improved economy would be welcome news for defense attorneys. "If the number of cases goes up, more lawyers will be able to earn a living," he says. "With fewer claims, there's less work for lawyers."
Read more at the WorkersComp Forum homepage.
March 14, 2011
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