Mega-Claims Under Scrutiny

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Mega-Claims Under Scrutiny

Mega-claims, defined by the National Council on Compensation Insurance (NCCI) as claims for which $10M or more has been paid or is expected to be paid, are an area of concern to workers’ compensation insurers of all sizes.

NCCI reports that in the United States there was an uptick in the number of mega claims in Accident Year (AY) 2016, noting that 10 claims of at least $10M were observed for AY 2016 (evaluated at 24 months). This number is more than for any of the previous 15 AYs at a comparable maturity.

Against that backdrop, Willis Towers Watson (WTW) took another look at this issue in 2018.  One of the chief concerns among workers’ compensation insurers is a potential surge in claims costs due to the growing complexity and cost of treatments related to new medical technologies, notes WTW.  The resulting premise, that the latest technology extends lives and generates additional medical treatment, was the basis for a large loss study conducted by WTW of 30 insured and self-insureds representing more than 30 percent of the U.S. workers’ comp market.  While it’s true that larger companies report a higher frequency of mega-claims than their smaller peers, of workers’ comp claims of more than $1M, claims frequency remained relatively flat.

The study’s results point to the trend that use of advanced medical techniques have not caused significant increases in claims amounts, and in fact, loss trends are consistent when measured against inflationary trends.  Further, the NCCI reports, the frequency of all claims dropped by 6 percent in each of the last two years.

Of the mega-claims reported, WTW notes that the most frequent causes of injury are falls, trips or slips. In their research, these claims account for an astounding 28 percent of $10M claims (comparable results based on aggregate are published by NCCI).  And while an overall common cause of workers’ comp minor claims, the evidence in the mega-claim category hints at falls occurring from heights or on ice, which creates potential for serious injury, such as brain trauma, higher.

In another mega-claims’ category, motor vehicle accidents account for 24 percent of claims and being struck by an object or machine contribute 23 percent. The most significant type of mega-claim injury is multiple trauma, which accounts for 54 percent of the claims count, followed by brain injury at 14 percent.

What’s notable is the distinguishing factor between $2M and $10M claims:  age.  In fact, 30 percent of the average of claimants at date of loss is under 40 years of age.  For mega-claims, close to 75 percent of claimants are under age 40 at date of loss, and face a lifetime of complicated and costly medical interventions, notes the report.

The good news is that the trend in mega-claims that was expected in recent accident years has not yet emerged.  However, notes WTW, insurers of all sizes are justified in their concern about expensive new medical technologies/treatments, noting that new drugs and treatments are almost guaranteed to increase costs, and since more medical professionals are using these treatments, it represents a trend worth watching.

Image courtesy of the National Council on Compensation Insurance (NCCI)