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Catastrophic Workers Comp Claims – Huge Hidden Effect


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. 

pic ghost part of catastrophic workers comp claims
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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?



James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management 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:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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