Workers’ Comp “MEGA-claims” on the Rise
Workers’ compensation mega claims, those that cost $3 million or more at 2018 cost levels, are on the rise, according to a recent study by a group of 10 U.S. rating agencies.
About 4,500 claims with incurred loss in excess of $3 million were reported from 2001 to 2017 as of Dec. 31, 2018, which is about one out of every 2,500 indemnity claims reported, a report based on the study states.
Of those claims coming in at $3 million and above:
- 57% were between $3 million and$5 million
- 33% were between $5 million and$10 million, and
- 10% were in excess of $10 million.
Mega claims do not happen nearly as often as more typical claims, but “with costs comprising between $1 billion and $2 billion each year, these claims are a highly unpredictable component of most workers’ compensation systems,” according to the report.
However, mega claims are occurring with more frequency because of:
- Medical advances
- Improving mortality patterns for those with serious injuries
- Increasing prevalence and cost of home healthcare, and
- Reform-related cost reductions in some states that have less impact on mega claims.
The data also shows:
- Mega claims for 2016 and 2017 were up significantly compared to previous years, but this may be due to insurers being able to identify them earlier.
- The construction sector had about 40% of the mega claims that occurred during the study period while having less than 20% of all indemnity claims.
- Brain and head injuries made up 30% of claims in excess of $10 million and 17% of those between$3 million and $5 million. Such claims fall well below 5% of all indemnity claims in most states.
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