Catastrophic Workers Comp Claims – Ghosted Parts
Mark Walls of Safety National Insurance and the Workers Comp Analysis Group on LinkedIn posted quite interesting articles over the last two weeks on the hidden effect of catastrophic workers comp claims. Check out this article in Carrier Chronicles.
Reading the article will be worth your time. I guarantee it.
NCCI, WCIRB and all the other workers comp rating bureaus have published presentations and articles on catastrophic workers comp claims. WCRI (not a rating bureau) out of Cambridge, MA has also covered this subject.
What Caught My Eye In The Above Article
As the above-linked article astutely points out: (bold emphasis):
It is important to note that bureaus like NCCI and WCIRB focus their research on the first-dollar market, which is comprised of a high percentage of small employers. These bureaus cap loss severity in their analysis and exclude claims that are open past 10 years. This approach does not accurately account for the long tail development and payout associated with catastrophic claims, which continue well past 10 years. In addition, self-insured employers that represent a significant percentage of the U.S. workforce, especially in segments such as public entities, hospitals, educational institutions, and large employers, generally do not report loss information to the NCCI or state rate-making bureaus.
Exactly is all that I can say about the above passage.
Loss Triangles and Catastrophic Workers Comp Claims
The article also refers to long-tail claims development. That is why I use and am an advocate of the Sum of Least Squares. I know that might sound like more statistical jargon but I like to look at a set of claims over 20 years – which is a normal business cycle. Follow the last link to the article that covers the subject.
I have made actuaries mad at me for that article. Mark Walls’s group is talking about even longer time spans which the Sum of Least Squares often referred to as Linear Regression can handle to infinity. By the way, all spreadsheet apps have Regression built into them including Excel’s Statistical package. (Free).
Bottom Line
Claims that stretch beyond 10 years are becoming more frequent every year. The Safety National article called it severity frequency. Catastrophic workers comp claims are going to grow over the next few years/decades.
Also Read: What Is A Guaranteed Cost Program In Workers Compensation?
