The Great Recession’s Effect on Workers’ Compensation Claims Frequency: NCCI

The Great Recession of 2007-2009 was the most serious and long-lasting economic contraction since the Great Depression.

The recession and its modest recovery had a considerable influence on workers’ compensation claim frequency, according to a new study by the National Council on Compensation Insurance (NCCI). The study provides NCCI’s latest frequency change estimate for accident year 2012 and examines the effect of the recession on frequency changes by various claim and employer characteristics.

Claim frequency for workers’ compensation injuries increased 3.8 percent in accident year 2010, marking the first increase since 1997. Prior to the 2010 uptick, claim frequency had been declining at an average rate of more than 4 percent per year since 1990. Following the 2010 uptick, claim frequency declined in 2011, albeit by a modest 0.9 percent (and, as just noted, declined in 2012).

In accident year 2012, lost-time claim frequency declined by 5 percent according to preliminary estimates. While frequency decreased by 5 percent, the average cost per lost-time claim increased 1 percent for indemnity and 3 percent for medical.

Over the five complete policy years ending with policy year expiring (PYE) 2011:

• Frequency per payroll declined by 16 percent (4.3 percent per year) but has leveled over the latest two years.
• Frequency per payroll declined for all industry groups, most notably in contracting and manufacturing.
• Frequency per payroll declined for all employer sizes, with the largest declines for employers having more than $100 million in payroll.
• Frequency declines were relatively consistent by NCCI type of injury.
• Payroll volume increased by double digits in the oil and gas and healthcare sectors, while declined nearly 2 percent for all industries combined.

In the oil and gas sector, claim frequency was high in the hydraulic fracturing industry.