Workers' Comp Claim Frequency Drops Again in '07

The decline in claim frequency for workers' compensation injuries has continued into 2007, but the magnitude is much smaller than in the previous two years, according to the National Council on Compensation Insurance (NCCI).

The 2007 drop in claim frequency extends a trend that started in the 1990s. But while claim frequency improved by nearly 7% in each of the previous two years, preliminary results indicate a more modest decline of 2.5% for 2007.

NCCI’s latest review of claim frequency and severity shows that, while claim frequency is down, indemnity and medical severities continue to rise. In the course of updating the annual study to reflect the latest frequency and severity results, a new dimension has been added. Claim frequency changes for permanent total claims, the costliest 1% of lost-time claims, are examined this year.

Key Issues

A key issue facing employers and workers' comp insurers is whether the large declines in claim frequency that began in the 1990s are likely to continue. Virtually every major employment category examined has experienced marked declines. A previous NCCI research report, “An Analysis of Factors Affecting Changes in Manufacturing Incidence Rates” (available on ncci.com) examined factors underlying the long-term decline in frequency since the early 1900s.

Preliminary summary data for Accident Year 2007 reveals continued overall declines in claim frequency and overall increases in indemnity and medical severities.

Key Findings

Key findings of the analysis are:

• Over the last five years, there were significant declines in total lost-time claims frequency for all industries, geographic regions, and employer sizes
• Permanent total claims have increased significantly over the last three years
• The rise in permanent total claims is evident across industries, regions, and payroll sizes
• From 2004 to 2006, the increase in permanent total claims may have increased lost-time indemnity severities by approximately 1.5% per year and lost-time medical severities by approximately 2.5% to 3% per year.