With the economy on the mend, U.S. companies are going back to business as usual--and to risks as usual. As companies resume hiring, one risk they should keep in mind is a possible uptick in workers compensation claims.
Over the last few years, workers comp claims have declined, falling 4% in 2009 and 3.4% in 2008, according to NCCI Holdings, an organization that tracks workers comp data. NCCI says that falloff reflects not only the decline in employment but also the fact that those still employed tended to be more experienced and less likely to be injured on the job.
Now that process may be reversed as companies rebuilding their workforces possibly add less experienced workers.
"In addition to some of the usual workers compensation exposures, we're likely to see additional workers compensation losses as a result of poor employer hiring practices," Patrick Clarke, manager of absence, health and productivity services at Zurich, said during an Advisen Web seminar last month.
When the economy is stable, workers with less than one year of experience make up only about a quarter of the workforce, Clarke says, but they are usually responsible for a larger share of lost-time claims--those involving medical costs and days off work. Zurich data show such workers are responsible for 40% of lost-time claims and 34% of the cost of lost-time claims.
Companies should think about appropriate job placement and whether workers are qualified for particular positions, Clarke says, as well as the orientation and training they provide new workers. "Orientation and training are important and don't need to be minimized," he says.
"Historically, when you bring on less trained employees, there has been an incidence of more losses," says Pam Ferrandino, executive vice president and leader of the casualty practice at Willis North America. "As people do gear up for an economic recovery, it is important to ensure that you're investing in safety and training in advance of bringing people back."
There has been a little firming in the market for workers comp coverage, with companies paying "maybe plus 1%, plus 2%," Ferrandino says, adding, "we have seen come clients take a slightly higher retention.
"But there's still plenty of capacity in the market," she says.