By CYRIL TUOHY, managing editor of Risk & Insurance®
If there was ever an example of how not to structure an insurance program, the United States workers' compensation system is it.
We have built a patchwork of laws differing from one state to another, so that we now have 50 states with different requirements. The system has become so unwieldy that any insurance carrier thinks twice about entering this subsector of the industry.
Our workers' comp system is rife with fraud and abuse, costing the industry billions of dollars in waste every year. Unscrupulous employers defraud the system, and so do nefarious claimants. Cheats abuse the system from both sides. Could anyone wish for a worse situation?
Industrial tragedies like New York's Triangle Shirtwaist Fire brought to light the need to protect workers in the face of exploitative factory owners.
States soon began to respond, and in 1911 Wisconsin passed the first workers' comp law in the United States. The law gave workers a security blanket in the event workers found themselves unable to return to work after being injured on the job, even after putting in 10 or 12 hours on the factory floor.
The workers' comp system was a good idea ... back in 1911. Today, though, it is a relic of our industrial nation as our work was structured 100 years ago.
That was when the manufacturing base of the United States was grounded in "heavy'' industries producing "big iron'' goods that lasted at least two or three generations. It was a time when a worker somewhere around the country lost a limb in an industrial vat and mangled fingers in a flywheel almost every month or every week.
We've changed, and our manufacturing processes are as safe and efficient today as they have ever been. Machines stop at the push of a button, or at the movement of pressure sensors. Dangerous work still exists, in the mining, fishing and poultry industries, for example.
Often, though, industrial accidents in those sectors are just as much the result of a company skirting the law than they are the result of equipment malfunctions.
Today, we're transformed ourselves to operate in a nimble service economy, the heavy lifting exported abroad. Yet the insurance system used to protect those of us who do the work has not adapted. We are left with a relic of an industrial age, an insurance system outdated and outmoded, one that no longer meets our needs -- if it ever did.
November 1, 2011
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