Claims Trends

WC Frequency Poised to Continue Long-Term Decline

Following a 2010 uptick, claims frequency has declined for three straight years at an average rate of about 3 percent per year.
By: | August 18, 2014 • 3 min read
Topics: Claims | Workers' Comp

Injuries involving the arms and shoulders bucked the trend of declining frequencies of most other body parts over the past five years. That’s among the findings in a new report on claims frequency in the workers’ comp industry.

While the Great Recession was likely responsible for frequency changes in recent years, other factors are now apparent. NCCI has drilled down into the particulars driving recent rates of injuries.


“The 2010 increase in frequency, the first increase in 13 years, may have been the result of recession-related factors,” said the research brief. “Despite the 2010 uptick, claim frequency resumed its decline in Accident Years 2011, 2012, and 2013. These are very positive signs that suggest that frequency will continue its historical long-term rate of decline.”

The research brief, Workers Compensation Claim Frequency — 2014 Update, expounds on data presented at NCCI’s Annual Issues Symposium earlier this year. The report also includes detailed information on frequency changes by selected claim characteristics and for policies with versus without small deductibles.

Overall Trends

“Claim frequency increased 3.5 percent in Accident Year 2010, the first significant increase in frequency in 20 years,” the report states. “Following the 2010 uptick, claim frequency has declined for three straight years at an average rate of about 3 percent per year.”

Evidence suggests an influx of small lost-time claims contributed to the increase in claims frequency for AY 2010. Workers fearful of losing their jobs may have delayed filing claims in 2009, but then filed them when the economy began to rebound, the authors suggest.

“Despite the 2010 uptick, claim frequency resumed its decline in Accident Years 2011, 2012, and 2013. These are very positive signs that suggest that frequency will continue its historical long-term rate of decline.” — NCCI

One of the changes seen in the most recent figures is the significant decline in frequency of claims above $50,000 in accident year 2012. These claims declined by more than 7 percent, whereas claims between $10,000 and $50,000 declined by 3.1 percent and small claims declined by just 1.4 percent. A closer look reveals two major drivers in the larger claims category.

“Within the Part of Body group, we found that the frequency of lower back claims declined by 11 percent versus 6 percent for all other claims in the category,” the report says. “Similarly, within the Cause of Injury group, we found that the frequency of slip and fall injuries declined by 12 percent versus 4 percent for all other claims in the category.”

Additional Breakdowns

Over the last five years, the frequency of injuries for most body parts declined by 13.9 percent while the frequency of injuries involving multiple body parts declined by 22 percent.

The frequency rate for arm and shoulder injuries, which represent 15 percent of injuries, remained flat. “This may be influenced by an older workforce,” the report suggests, “where rotator cuff injuries are not uncommon.”

In terms of the injury type, frequency for permanent partial and temporary total claims were consistent with the overall decline of 13.9 percent for all injury types while fatal and permanent total claims showed more volatility each year, due to the smaller volume of these claims. The authors note that the figures are based on injury type reported as of first report and that the development of claim counts can differ considerably as they reach ultimate level.

“For example, subsequent to first report, some claims will become fatal claims and others will become PTD claims,” the report explains. “Fatal claim frequency at first report is more than three times higher than permanent total disability claim frequency. However, this difference will decline as claims age since more PTD claims than fatal claims will emerge beyond first report.”


Sprain/strain, comprising the majority share of claims by nature of injury, declined by 10 percent. That compares to a decline of 17 percent for all other categories combined. The frequency of carpal tunnel syndrome claims dropped by 25 percent, although the rate of decline has slowed in the most recent years.

In terms of the cause of injury, there was a steep drop in the frequency of cumulative injury claims — more than 18 percent. Injuries in the category of cut/puncture/scrape dropped by 23 percent. “A possible explanation is that the types of injuries in both of these categories may be relatively more preventable through loss control and safety measures.”

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance


Insurers Take to the Skies

This year’s hurricane season sees the use of drones and other aerial intelligence gathering systems as insurers seek to estimate claims costs.
By: | November 1, 2017 • 6 min read

For Southern communities, current recovery efforts in the wake of Hurricane Harvey will recall the painful devastation of 2005, when Katrina and Wilma struck. But those who look skyward will notice one conspicuous difference this time around: drones.


Much has changed since Katrina and Wilma, both economically and technologically. The insurance industry evolved as well. Drones and other visual intelligence systems (VIS) are set to play an increasing role in loss assessment, claims handling and underwriting.

Farmers Insurance, which announced in August it launched a fleet of drones to enhance weather-related property damage claim assessment, confirmed it deployed its fleet in the aftermath of Harvey.

“The pent-up demand for drones, particularly from a claims-processing standpoint, has been accumulating for almost two years now,” said George Mathew, CEO of Kespry, Farmers’ drone and aerial intelligence platform provider partner.

“The current wind and hail damage season that we are entering is when many of the insurance carriers are switching from proof of concept work to full production rollout.”

 According to Mathew, Farmers’ fleet focused on wind damage in and around Corpus Christi, Texas, at the time of this writing. “Additional work is already underway in the greater Houston area and will expand in the coming weeks and months,” he added.

No doubt other carriers have fleets in the air. AIG, for example, occupied the forefront of VIS since winning its drone operation license in 2015. It deployed drones to inspections sites in the U.S. and abroad, including stadiums, hotels, office buildings, private homes, construction sites and energy plants.

Claims Response

At present, insurers are primarily using VIS for CAT loss assessment. After a catastrophe, access is often prohibited or impossible. Drones allow access for assessing damage over potentially vast areas in a more cost-effective and time-sensitive manner than sending human inspectors with clipboards and cameras.

“Drones improve risk analysis by providing a more efficient alternative to capturing aerial photos from a sky-view. They allow insurers to rapidly assess the scope of damages and provide access that may not otherwise be available,” explained Chris Luck, national practice leader of Advocacy at JLT Specialty USA.

“The pent-up demand for drones, particularly from a claims-processing standpoint, has been accumulating for almost two years now.” — George Mathew, CEO, Kespry

“In our experience, competitive advantage is gained mostly by claims departments and third-party administrators. Having the capability to provide exact measurements and details from photos taken by drones allows insurers to expedite the claim processing time,” he added.

Indeed, as tech becomes more disruptive, insurers will increasingly seek to take advantage of VIS technologies to help them provide faster, more accurate and more efficient insurance solutions.

Duncan Ellis, U.S. property practice leader, Marsh

One way Farmers is differentiating its drone program is by employing its own FAA-licensed drone operators, who are also Farmers-trained claim representatives.

Keith Daly, E.V.P. and chief claims officer for Farmers Insurance, said when launching the program that this sets Farmers apart from most carriers, who typically engage third-party drone pilots to conduct evaluations.

“In the end, it’s all about the experience for the policyholder who has their claim adjudicated in the most expeditious manner possible,” said Mathew.

“The technology should simply work and just melt away into the background. That’s why we don’t just focus on building an industrial-grade drone, but a complete aerial intelligence platform for — in this case — claims management.”

Insurance Applications

Duncan Ellis, U.S. property practice leader at Marsh, believes that, while currently employed primarily to assess catastrophic damage, VIS will increasingly be employed to inspect standard property damage claims.

However, he admitted that at this stage they are better at identifying binary factors such as the area affected by a peril rather than complex assessments, since VIS cannot look inside structures nor assess their structural integrity.

“If a chemical plant suffers an explosion, it might be difficult to say whether the plant is fully or partially out of operation, for example, which would affect a business interruption claim dramatically.


“But for simpler assessments, such as identifying how many houses or industrial units have been destroyed by a tornado, or how many rental cars in a lot have suffered hail damage from a storm, a VIS drone could do this easily, and the insurer can calculate its estimated losses from there,” he said.

In addition,VIS possess powerful applications for pre-loss risk assessment and underwriting. The high-end drones used by insurers can capture not just visual images, but mapping heat, moisture or 3D topography, among other variables.

This has clear applications in the assessment and completion of claims, but also in potentially mitigating risk before an event happens, and pricing insurance accordingly.

“VIS and drones will play an increasing underwriting support role as they can help underwriters get a better idea of the risk — a picture tells a thousand words and is so much better than a report,” said Ellis.

VIS images allow underwriters to see risks in real time, and to visually spot risk factors that could get overlooked using traditional checks or even mature visual technologies like satellites. For example, VIS could map thermal hotspots that could signal danger or poor maintenance at a chemical plant.

Chris Luck, national practice leader of Advocacy, JLT Specialty USA

“Risk and underwriting are very natural adjacencies, especially when high risk/high value policies are being underwritten,” said Mathew.

“We are in a transformational moment in insurance where claims processing, risk management and underwriting can be reimagined with entirely new sources of data. The drone just happens to be one of most compelling of those sources.”

Ellis added that drones also could be employed to monitor supplies in the marine, agriculture or oil sectors, for example, to ensure shipments, inventories and supply chains are running uninterrupted.

“However, we’re still mainly seeing insurers using VIS drones for loss assessment and estimates, and it’s not even clear how extensively they are using drones for that purpose at this point,” he noted.

“Insurers are experimenting with this technology, but given that some of the laws around drone use are still developing and restrictions are often placed on using drones [after] a CAT event, the extent to which VIS is being used is not made overly public.”

Drone inspections could raise liability risks of their own, particularly if undertaken in busy spaces in which they could cause human injury.

Privacy issues also are a potential stumbling block, so insurers are dipping their toes into the water carefully.

Risk Improvement

There is no doubt, however, that VIS use will increase among insurers.


“Although our clients do not have tremendous experience utilizing drones, this technology is beneficial in many ways, from providing security monitoring of their perimeter to loss control inspections of areas that would otherwise require more costly inspections using heavy equipment or climbers,” said Luck.

In other words, drones could help insurance buyers spot weaknesses, mitigate risk and ultimately win more favorable coverage from their insurers.

“Some risks will see pricing and coverage improvements because the information and data provided by drones will put underwriters at ease and reduce uncertainty,” said Ellis.

The flip-side, he noted, is that there will be fewer places to hide for companies with poor risk management that may have been benefiting from underwriters not being able to access the full picture.

Either way, drones will increasingly help insurers differentiate good risks from bad. In time, they may also help insurance buyers differentiate between carriers, too. &

Antony Ireland is a London-based financial journalist. He can be reached at [email protected]