Indemnity-only Claims Spiked During the Pandemic – Why?
I have reviewed thousands of loss runs in my consulting career, I have not to date seen on loss runs any indemnity-only claims. That was before the pandemic that changed so many variables in the WC system.
As a quick review, the three types of workers comp benefits are indemnity, medical, and allocated loss expenses (ALAE). Approximately 85% of all workers comp claims are medical-only claims. Claims with lost time benefits total approximately 15%. Those are my numbers from performing loss run analyses for 35 years. Indemnity-only claims used to be an extreme rarity.
Total Claim Numbers Fell For Years
The total number of WC claims (frequency) had been falling for many years. while claim severity had increased. What caught my eye in this study was that overall total claim counts increased due to COVID-19 claims.
Indemnity-only Claims Definition
A great study on the pandemic by most of the Workers Comp rating bureaus was published in three different phases. The one that I am referring to can be found at this link.
The rating bureaus’ combined study defined the modern term as:
A typically small claim, representing a few weeks of indemnity payments. Examples include mild cases where a positive COVID-19 test was not reimbursed through WC, quarantine claims (where covered), and/or claims where the medical was paid by another payer. Quarantine claims are those where there was no positive COVID-19 test but the worker was reimbursed for lost time while quarantining from exposure to the pandemic. These claims are only explicitly covered in some jurisdictions.
The workers comp rating bureau that participated in the collaboration are represented in the above infograph.
This was an impressive job to combine all the rating bureau info into one document which was a large project. I recommend downloading it if not for anything more than reference. Once downloaded, you may want to at least skim over the information – worth the time.
Indemnity-only claims while uncommon for non-COVID-19 claims, continued to represent the largest share of COVID-19 claim types. By the end of 2021, 47% of COVID-19 claims were Indemnity-only claims. On average, these claims are relatively less costly, accounting for a relatively small amount of total loss. —an average cost of approximately $9,600 per COVID-19 claim from Accident Years 2020 and 2021 as of year-end 2021. The average lost time claim pegged at $45,000.