Rise in construction comp claims severity offset by flat frequency

While claim frequency in workers compensation has been flat for a decade, claim severity is increasing, and no industry is seeing it more than construction, according to panelists at the 42nd International Risk Management Institute Inc. Construction Risk Conference.

“This is driven by medical advances,” said Mark Walls, vice president, communications & strategic analysis, for Safety National Casualty Corp. “They’re getting better treatment; they’re getting a medevac helicopter to a level one trauma center.

“The people living (after catastrophic accidents) used to die. But those people are really messed up, and so it tends to be a very, very expensive claim because of that. We have seen in our data set a 30% increase over the last three years of claims with over $10 million.”

Mr. Walls joined two other panelists discussing workers compensation issues facing the construction industry, including claims severity, labor force challenges and marijuana legalization.

While some challenges are ongoing, and not easy to quantify, injury severity in construction – where worker accidents are often more catastrophic than in other industries — is leading to a rise in high-dollar claims.

As an example, amputations — comparatively common in the construction industry — used to cost much less; a $5,000 prosthetic was commonplace, Mr. Walls said. Now, with technological advances that provide more function for an amputee, costs can rise to $40,000 for a device that is not as durable as the traditional prosthetic.

Another example common in the construction industry involves those who are paralyzed after accidents, he said. The traditional life expectancy for such injured workers had been a decade and can now be three times that long, he said.

“The medical science here is amazing,” he said. “But there are costs. These big claims are getting much, much bigger, and unfortunately these are the types of claims that you often see in your industry.”

Meanwhile, claims frequency in construction has remained flat over the past decade, with the exception of the COVID-19 pandemic, which saw a sudden drop and subsequent increase in frequency, according to panelist Donna Glenn, chief actuary for the National Council on Compensation Insurance.

The generally flat trend helps offset rising costs related to severity, and it’s why the construction industry should continually focus on workplace safety, she said.

Safety “is the fuel behind the long-term frequency decline,” she said, when questioned about technological advances making workplaces safer, such as wearables that alert workers of hazards. “The fact that (the industry) is continuously improving (on safety) is contributing to that continuation of prevention.”

Panelists also addressed the challenge of finding qualified, experienced workers and what it means in terms of injury risks.

“Data shows that there tends to be a higher accident frequency rate for the newer workers,” Mr. Walls said. “The other concern becomes if you don’t have enough workers, your people are having to do more with less; they’re working longer hours. That can lead to over-exertion and chances of injuries occurring.”

The aging workforce is another challenge, as such workers tend to take longer to heal and can have comorbidities that complicate their recovery, Ms. Glenn said.

The potential impact of marijuana legalization is another issue facing the construction industry and its ability to prevent accidents. There is limited adequate drug testing in this area, and some jurisdictions bar drug testing in some cases.

It’s likely workers, many in the states that have legalized marijuana for medicinal and recreational purposes, are partaking, Mr. Walls said.

“As employers in a higher risk industry, I’m sure it gives you great comfort to know that at any given time a percentage of your workforce is stoned,” Mr. Walls said, noting legalization efforts are underway for other drugs. Colorado, for example, just legalized hallucinogenic mushrooms.

“This is a huge challenge for employers because your drug testing policies vary,” he said.

Another issue, he said, is that the Occupational Safety and Health Administration does not allow employers to have a blanket post-accident, drug-testing program for fear that workers will not report accidents and injuries out of fear.

This article was first published in Business Insurance.

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