nach oben

1990 | Buch

Kapitel lesen Erstes Kapitel lesen

Benefits, Costs, and Cycles in Workers’ Compensation

herausgegeben von: Philip S. Borba, David Appel

Verlag: Springer Netherlands

Buchreihe : Catastrophe Modeling

Enthalten in: Professional Book Archive

Einloggen, um Zugang zu erhalten

Über dieses Buch

Workers' compensation insurance presents a set of institutional charac teristics that are unique. For every other form of insurance, both the insurer and the coverage provided under the policy are completely controlled either by the federal or a state government, or by an arrangement between the insured and a property-casualty insurer. Unemployment insurance, Social Security, and bank-deposit insurance are examples for which a legis lative body sets the benefits. and a government agency prescribes the in surance premium. By contrast, the coverage and premiums for automobile, homeowners, and fire insurance are individual contractual arrangements between a policyholder and one of the more than 1800 U. S. property casualty insurance companies. Workers' compensation insurance, however, is a hybrid in which state legislatures stipulate the terms of coverage, while regulated competition is the major determinant of prices. State legislatures enact statutes that prescribe the replacement rate and duration of indemnity benefits, as well as full reimbursement of medical expenses. And although the manual rates for workers' compensation insurance continue to be administered by a prior approval process in most states, the competitive-market price for coverage is achieved through a variety of price-modification plans (Appel and Borba, 1988).

Inhaltsverzeichnis

Frontmatter

1. Have Increases in Workers’ Compensation Benefits Paid for Themselves?

Abstract

Since the early 1970s there has been a dramatic change in the market for hazardous jobs. The government began direct control of workplace technology through occupational safety and health regulations,¹ while the judicial system became an active player in the area of ex post compensation of job risks. This compensation for long-term health risks, particularly for asbestos workers, may run in the tens of billions of dollars.²

Michael J. Moore, W. Kip Viscusi

2. Heterogeneity Bias in the Estimation of the Determinants of Workers’ Compensation Loss Distributions

Abstract

The potential for someone covered by insurance either to have too many accidents, or to have too large a loss, is termed moral hazard in the insurance literature. In a world of perfect information and competitive markets for insurance, there should be no moral hazard with respect to workers’ compensation, since both job risk and risk severity would be observed exactly by the insurer, the employer buying insurance, and the workers receiving the benefits. Moral hazard arises because workers, insureds, and insurers do not have perfect knowledge of what the other parties are always doing. In the absence of moral hazard, an increase in benefits should probably have very little impact on either the frequency or the severity of a claim.

John D. Worrall, Richard J. Butler

3. Workers’ Compensation Disability Benefits during Retirement Years: Proper and Present Role

Abstract

About 70% of the $17.5-billion workers’ compensation benefits paid to workers with job-related injuries or diseases in 1983 were cash benefits (Price, 1986). The remaining payments went to providers of medical care to these workers. Of the cash payments, about 87% went to disabled workers either as income replacement benefits or as compensation for physical impairments. The other 13% were death benefits payable to survivors of deceased workers. An unknown, but not negligible, proportion of the disability benefits were paid to workers who, if they had not been disabled by job-related injuries or diseases, would have retired prior to 1983.¹ This chapter deals with a seldom-discussed aspect of workers’ compensation—whether workers’ compensation disability benefits should be continued past the age at which the worker, if not disabled, presumably would have retired. This chapter will 1) present a case for discontinuing these benefits at the presumed retirement age, 2) summarize similar proposals made by others, 3) indicate whether United States jurisdictions currently make any adjustments during postretirement years, 4) explore the political and administrative reasons that explain the disparity between the proposed discontinuance and present practice, and 5) present a modified proposal that may be more acceptable.

C. Arthur Williams Jr., Peter C. Young

4. Rehabilitation and Workers’ Compensation: Incompatible or Inseparable?

Abstract

It is intuitively reasonable and eminently logical to give injured workers the opportunity to receive rehabilitation services designed to speed their return to work. Rehabilitation would seem to be an inseparable part of workers’ compensation, and yet recent events demonstrate anew how incompatible the two programs may be. The states of Washington and Colorado have amended their laws to cut back on their commitment to mandatory rehabilitation, and the rehabilitation provisions of the workers’ compensation laws in California, Minnesota, and Florida are under attack. Our purpose is to explore the uses of rehabilitation in workers’ compensation, and to examine whether the programs are inseparable, as has been the traditional claim, or incompatible, as recent experience would suggest.

Monroe Berkowitz

5. Mostly on Monday: Is Workers’ Compensation Covering Off-the-Job Injuries?

Abstract

Social insurance programs that compensate individuals for loss of earnings create incentive problems of three kinds. First, because they receive income support when not working, and lose such support upon returning to work, individuals often face diminished labor supply incentives. Thus, workers receiving more generous social insurance payments as compensation for some economic calamity can be expected to take longer to recover from that calamity. Second, offering insurance payments to those suffering losses can raise the probabilities that such losses will occur. People insured against losses frequently face diminished incentives to avoid risky outcomes, and in cases of overinsurance they can even find it in their best interests to deliberately cause the loss to occur (the problem of moral hazard). The third problem inherent in social insurance programs involves false reporting. Insurance payments are triggered by the occurrence of some contingency, and the temptation to falsely report an occurrence can be quite strong—especially if penalties for misrepresentation are weak and/or the benefits are high.

Robert S. Smith

6. Premium and Loss Cycles in Workers’ Compensation

Abstract

Cycles in workers’ compensation are, like any recurrent economic phenomenon, interesting either because they ultimately reflect some underlying social process or because they have the potential for significantly altering the way that economic agents allocate scarce resources. The underwriting cycle is nominally interesting for the latter reason: to the extent that the combined ratio (losses plus expenses to premiums) reflects the profitability of an insurance enterprise, systematic movements in the combined ratio should signal arbitrage opportunities. In an insurance market like workers’ compensation, with relatively easy entrance and exit, stable profit cycles ought to be accompanied by concomitant cycles of capital flowing in and out of the industry or at least by a systematic change in the value of insurance stock over the cycle. The fact that there are neither capital flows nor changes in the value of the insurance firm over these profitability cycles (Doherty and Kang (1984) note that such profit cycles should be reflected in the market price of insurance stock) seems to indicate that combined ratio is not a useful indicator of profits. At least we are not convinced that it is.

Richard J. Butler, John D. Worrall

7. Discounted Cash-Flow Ratemaking Models in Property—Liability Insurance

Abstract

Property—liability insurance contracts are characterized by a time lag between the premium payment and loss settlement dates. During this time lag, the insurance company earns investment income on the unexpended component of the premium. Given this timing difference, it is surprising that the recognition of investment income in ratemaking is a relatively recent phenomenon. Prior to the late 1960s, property—liability ratemaking formulas reflected a profit margin that was a flat percentage of the gross premium (usually 5%). The timing difference between premiums and claims and the resulting investment income were ignored in formal ratemaking procedures.

J. David Cummins

Backmatter

Titel: Benefits, Costs, and Cycles in Workers’ Compensation
herausgegeben von: Philip S. Borba
David Appel
Verlag: Springer Netherlands
Electronic ISBN: 978-94-009-2179-5
Print ISBN: 978-94-010-7476-6
DOI: https://doi.org/10.1007/978-94-009-2179-5

Springer Professional

Über dieses Buch

Inhaltsverzeichnis

Frontmatter

1. Have Increases in Workers’ Compensation Benefits Paid for Themselves?

2. Heterogeneity Bias in the Estimation of the Determinants of Workers’ Compensation Loss Distributions

3. Workers’ Compensation Disability Benefits during Retirement Years: Proper and Present Role

4. Rehabilitation and Workers’ Compensation: Incompatible or Inseparable?

5. Mostly on Monday: Is Workers’ Compensation Covering Off-the-Job Injuries?

6. Premium and Loss Cycles in Workers’ Compensation

7. Discounted Cash-Flow Ratemaking Models in Property—Liability Insurance

Backmatter