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Home » Archives for August 2017

Archives for August 2017

Accident Curve And Natural Disasters – Spike in Workers Comp Claims

August 31, 2017 By JL Risk Management Consultants

Accident Curve And Natural Disasters

The accident curve measures the accident rate lessening per unit of  work time.   The concept has been debated over time.   A search far and wide located a 1916 text that actually addressed this issue very well.  Please see the last two sets of bullet points below.    The picture is of Hurricane Isabel. 

Hurricane Isabel Accident Curve from space

Wikimedia Commons License

 The learning curve measures how long it takes for a person to learn a new task.   The accident curve measures how many accidents happen in the first few hours someone works with a new machine or performs a new task.  

I performed an informal study on the accident rates of claims that I was handling post-Hurricane Hugo.   After two months, the claim numbers spiked and then returned to normal.   Most of the injured workers were new to the construction industry.  They were involved with the hurricane recovery efforts for many months.    

We have all heard the expression “90% of the accidents occur the first time someone uses a tool/machine” or the first time a person performs a completely new task.   Hendersons law is:

C_{n}=C_{1}n^{{-a}} Accident Curve

where:

  • C1 is the cost of the first unit of production
  • Cn is the cost of the n-th unit of production
  • n is the cumulative volume of production
  • a is the elasticity of cost with regard to output

A few classes I attended to complete my actuarial degree covered the learning curve heavily.   The application centered around production.  Safety did not seem to be an issue.   However, the learning curve is a the crux of a safe workplace.    Hands-on training reduces workers comp accidents or their severity by exposing the workers to a learning curve with a person or persons that have long since handled the type of  new task.

The actual formula uses  logarithms to estimated the time it will take someone to complete the task.  A very astute scientist derived an accident curve from the formula.   However, they derived the accident curve from actual hands-on measurement in manufacturing plants.    You will need to refer to the bottom page 127 of this old but still relevant text.   The text is included below justifying the accident curve consideration.   The studies were conducted on very heavy labor iron and steel plants. 

ACCIDENTS AND INEXPERIENCE THE HIGH RISK OF BEGINNERS

Car Accident Curve Sheriff Behind

StockUnlimited

It is generally recognized that inexperience is one of the most important elements in the causation of industrial accidents. What has not been sufficiently realized is the close parallelism of the rates of accidents and of inexperience.  The industrial risks of beginners have been shown to be high Interesting testimony on this subject is given in the iron and steel report already quoted.

A table giving the incidence of accidents to press hands beginning work on the machine shows that on the first day of employment:

  • More than 5 times as many were injured as during all the rest of the first week
  • 26 times as many as from the second week to the end of the first month
  • 100 times as many as from the second through the sixth month

One can presume the figures indicate a six-month employee is 100 times less likely to have an accident as the first day employee. 

Another table covering longer periods of employment shows the accident frequency rates per 1,000 workers at a steel plant falling from the exceedingly high rate of

  • 111.3 per 1,000 in the first six months through
  • increasing lengths of service to 19.7 for from 5 to 10 years and to
  • zero after 15 years. 

The book did not mention the level of training in these cases.   One would have to guess that it was strictly on-the-job-training.    I was going to construct a few graphs but the numbers speak for themselves.   

I would love to dig into this further, but I have to get this article proofread, published and then publish a weekly newsletter. 

©J&L Risk Management Inc Copyright Notice

Filed Under: accident curve, accident rate Tagged With: actuarial degree, astute scientist, Hendersons law, Huuricane Hugo, steel plant falling

Workers Comp Writers Block – Writing Into Funnel

August 29, 2017 By JL Risk Management Consultants

Workers Comp Writers Block Not A Fun Time

Having Workers Comp writers block for the first time in 11 years ended with this article.   The last three weeks contained the longest workers comp writers block for me.  

man typing workers comp writers block head

Wikimedia Commons – Drew Coffman

 The comment on writing into a funnel means that if I covered a subject in 2008 and now write about it again, the Google search algorithm  penalizes duplication.    

Matt Cutts, the Google spam guru rep says Google does not penalize duplication.   However, if you write two articles on the same subject, each are partially devalued as Google makes a choice on which article gets the juice and ranking.   

Of course Google is trying to remove spammers from their rankings.   No blame goes to Google.  

The last article on the .85 Combined Ratio announced at the NCCI Virginia Conference created quite a bit of buzz.   In a roundabout way, Workers Comp carriers consider the market to be potentially profitable.  

I began the blog to publish articles on workers comp premium audit and reserves.  The writing funnel discourages me from continuing to write on those two subjects.  

Many workers comp authors began damning the system a few years ago to get attention.  It seems they are still at it today.   We decided a few years ago to stop publishing articles that bash one facet or group of people in the Workers Comp business.  I just finished reading an article of that sort.  

Woman Workers Comp Writers On Notes

StockUnlimited

Is it me or has there been way too many articles on opioids (not counting research WCRI, NCCI, etc.)?  

One very positive note entails the updating and improvement of all 1,672 articles.   Our web consultant contractor works tirelessly to improve the look (graphics, text spacing, and Google ranking) of the blog and website.   I have spent 30 – 40 hours in the last two months reviewing and upgrading some of the text.  

I begrudgingly removed 30 -40 articles which provided no knowledge advancement in the area of Workers Compensation. 

1,672 articles now exist in this blog.  Feel free to search them at the box on the top right of the screen.   

PS  I cannot call it writer’s or writers’ block as the apostrophes in Titles make the HTML go crazy.  

©J&L Risk Management Inc Copyright Notice

Filed Under: Cutcompcosts Tagged With: algorithm, begrudgingly removed, potentially profitable, remove spammers

Workers Comp Statistic Combined Ratio Best In 50 Years – NCCI

August 8, 2017 By JL Risk Management Consultants

NCCI Workers Comp Statistic Combined Ratio Smoking 

One workers comp statistic stood out the August 3rd NCCI Virginia State Advisory Forum.  Actually, it exceeded even my positive outlook for the Workers Compensation market health.

Steering Workers Comp Statistic Wheel

Wikimedia Commons – CZmarlin

The Combined Ratio performed even better than last year in the overall market.    Last year the ratio pegged at 94%.   What does this mean?   The formula consists of three main variables:

Losses + Expenses / Earned Premium

The current workers comp statistic – Combined Ratio came in at 85% this year.    The Combined Ratio measures a market’s total efficiency.   Investment income by carriers is not counted in the Combined Ratio.  

According to NCCI,, this was the best Combined Ratio in 50 years.   Does this mean that carriers are making a 15% profit off all written premium – not exactly, but the more the number decreases, the healthier the market becomes overall.   

Many people in the workers comp world say the statistic means that carriers are writing policies at a 15% rate of profit.  I usually do not dissuade that type of discussion.  

One of the more interesting concepts is no one can point out the source of the Combined Ratio improving so much.  Could it be the economy?  Yes, possibly.

The best way to think of the inputs that caused such a positive effect originates from a combination of variables.   As Work Comp is such as delayed-measuring system, the true source of the success may not be attributed to any group of factors for another five to ten years. 

I marked a few more pages in the presentation.   (You may want to download the PDF from the first link in this article.)   They were:

  • Slide 20 – Changes in Medical Lost-Time – Claim Severity by Component.   The utilization number has decreased to an almost no growth figure compared to 20 years ago. 
  • Slide 32 – All states are reducing Loss Costs except Virginia Hawaii and South Carolina 
  • Slide 33 – North Carolina reduced Loss Cost on 4/1/17 by   –14.4% which was the largest reduction in the US. 

©J&L Risk Management Inc Copyright Notice

Filed Under: combined ratio, NCCI Tagged With: combination of variables, delayed-measuring system, positive effect, State Advisory Forum

Insurance Industry Employment Alarming Numbers – Shocker

August 2, 2017 By JL Risk Management Consultants

Insurance Industry Employment Figures  Should Be A Wake Up Call 

These insurance industry employment trends should sound off a few alarms.  Recently, I was reading the July issue of AM Best’s Monthly Magazine.

Picture Alarm Insurance Industry Employment Clock

Wikipedia Commons – Jorge Barrios

 The July Issue covers the Millennial paradox among other concerns.   One of the article covers a very salient point.   The industry employment threats abound now with the attrition and aging of the workforce versus the slow pace of the new hires. 

One table on page 3 of the article stopped the show.    The numbers from the Baby Boomer’s Exit table*:

  • 74% increase in the number of employees aged 55 and older in the last decade (ouch!)
  • 25% of the insurance industry workforce consist of employees aged 35 or less. 
  • 50% of the industry workforce will be retired by 2030.  
  • 20% of experienced underwriters will retire in the next few years 
  • And the grande finale —are you ready for this one–-70% of insurance adjusters age > 40!   

Let us cover those  fascinating insurance industry employment numbers one more time.

The 74% number alone rings an alarm bell with me.   I have just joined that group over the last year.   Attending a safety and risk management conference a few years ago opened my eyes.  No one under 40 showed up for the conference.   Everyone was the same people I talked with and had seen over the last 20 years.  There were no new faces.    

The second bullet point aligns with the first one.   I have experienced this at many conferences lately.  Where was the younger crowd?  I was told possibly that companies send only Senior level people to the conferences.  I find that hard to believe.  Why?  When I attend conferences outside of the insurance industry, the 35 and younger attendees are out in force. 

Alarm Bell Insurance Industry Employment In Red Color

Wikipedia Commons – BrokenSphere

The third bullet point could be allayed with the fact that technology may replace some of the workforce.   However, 50% coverage is an illusion.  

The fourth bullet point shows the insurance underwriting industry losing 20% of the workforce.  Once again, I have been told technology will replace much of this function.   Twenty years from now this could possibly happen, but not in the next few years.   

The fifth bullet point, which made me write this article, shows a real crisis in one area the insurance industry must heed – only 30% of the adjusters are under age 40. (Double ouch).   I was informed once again that this shortfall can be withstood by the increase in technology.   However, the insurance industry  cannot make this ground as insurance seems to be far behind in technology.   I have written many articles on the lack of the technology in Workers’ Compensation.  

One wonders what the solution will be ten years from now.  

*Credits should be given to McKinsey and Co., Insurance Careers  movement, Bureau of Labor Statistics, The Jacobson Group, Deloitte, and The Institutes for the table as AM Best used them to create the table. 

©J&L Risk Management Inc Copyright Notice

Filed Under: AM Best Tagged With: attrition and aging, Baby Boomer, bullet point aligns, younger attendees

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James J Moore
Raleigh, NC, United States

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:
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• Risk & Insurance Magazine
• Insurance Journal
• Workers Compensation.com
• LinkedIn, Twitter, Facebook and other social media sites
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