Comp frequency rises 3% – first increase since ’97

Via Business Insurance, NCCI this week announced that workers comp claim frequency rose 3% last year, the first increase since 1997 and the biggest increase in more than two decades. The previous 19 years, frequency had fallen 56%. Here’s a chart from the full report (pdf):

Why the increase: With the Great Recession, frequency fell as workers feared too much for their jobs to report an injury. Last year, feeling more job security, they began reporting injury again.

Also worth noting that before adjustments, frequency appeared to rise 9% – that’s why the last column in the graph has two tones. Two adjustments are tied to the denominator – calendar year earned premium. The other affects the number of claims:

  • CYEP was dragged down by return premiums. As comp actuaries well know, premiums paid in advance estimate how many employees will be covered in the coming year. There’s an adjustment after the policy period to reflect actual exposure. In 2008 and 2009, employment fell well short of expectations. Insurers refunded a bunch of that premium in 2010. Pushing exposure down drove frequency higher artificially. Adjusting for this took 5 points off frequency.
  • Construction business took up a smaller share of premium last year than in previous years. Construction business has low frequency per thousand dollars of premium (severity is high). Less low frequency business in the mix will drive frequency higher.
  • Average hours worked per week increased. As hours worked rises, so do comp claims, without a commensurate increase in premium.

These last two adjustments were worth one percentage point.

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One thought on “Comp frequency rises 3% – first increase since ’97

  1. […] Workers comp frequency rose 3% last year, the first increase since 1997. My take is here. […]

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