The National Council on Compensation Insurance (NCCI) recently released a comprehensive study examining "mega claims" in workers' compensation insurance. These are claims with reported losses exceeding $2 million, representing a small fraction of total claims but a significant portion of total loss dollars. The study covers accident years 2001-2021, providing valuable insights into trends and patterns within this high-cost category.
Key Findings:
- Prevalence: While less than 0.1% of all workers' compensation claims fall into the "mega claim" category, they account for over 2% of total loss dollars, exceeding $1 billion annually.
- Severity: These claims typically involve severe injuries requiring extensive medical treatment and prolonged recovery, often resulting in significant time away from work.
- Distribution: Most mega claims (53%) fall within the $2 million to $3 million range, with 27% between $3 million and $5 million, 15% between $5 million and $10 million, and 4% exceeding $10 million.
Implications for the Industry:
The NCCI's study highlights the substantial financial impact of mega claims on the workers' compensation system. This information is crucial for:
- Insurers: Understanding the potential for significant losses can help insurers develop appropriate risk management strategies, including pricing, reserving, and reinsurance.
- Employers: Awareness of the factors contributing to mega claims can help employers implement proactive safety measures to reduce the likelihood of such incidents.
- Policymakers: The study provides data to inform policy decisions regarding workers' compensation laws and regulations.
Looking Ahead:
As the healthcare landscape evolves and medical costs rise, the frequency and severity of mega claims will likely remain significant concerns for the workers' compensation industry. The NCCI's study provides a valuable foundation for further research and analysis to better understand and mitigate the risks associated with these high-cost claims.
For more detailed information and analysis, please refer to the full NCCI report.
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*Jon L. Gelman of Wayne, NJ, is the author of NJ Workers’ Compensation Law (West-Thomson-Reuters) and co-author of the national treatise Modern Workers’ Compensation Law (West-Thomson-Reuters). For over five decades, the Law Offices of Jon Gelman 1.973.696.7900
jon@gelmans.com has represented injured workers and their families who have suffered occupational illnesses and diseases.
Blog: Workers' Compensation
LinkedIn: JonGelman
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