Skip to main content
Fachgebiete
Automobil + Motoren Bauwesen + Immobilien Business IT + Informatik Elektrotechnik + Elektronik Energie + Nachhaltigkeit Finance + Banking Management + Führung Marketing + Vertrieb Maschinenbau + Werkstoffe Versicherung + Risiko
DE
EN
Bücher
Zeitschriften
Themenseiten
Organisationspsychologie Projektmanagement Marketing Smart Manufacturing
Weitere Formate
Podcasts Webinare Technik Webinare Wirtschaft Kongresse Veranstaltungskalender Awards
Jetzt Einzelzugang starten
Zugang für Unternehmen
Referenzkunden
SLX-Digitalkonferenz: Zukunftswerkstatt 2024

Mehr Umsatz mit Top-Kontakten

Am 7. Mai erfahren Sie, wie Vertriebsteams Leadgenerierung, Leadnurturing und Leadstrategien effizient steuern können.
Erweiterte Suche
Anmelden
nach oben

1993 | Buch

The Determination of Workers’ Compensation Benefit Levels Kapitel lesen Erstes Kapitel lesen

Workers’ Compensation Insurance: Claim Costs, Prices, and Regulation

herausgegeben von: David Durbin, Philip S. Borba

Verlag: Springer Netherlands

Buchreihe : Catastrophe Modeling

Enthalten in: Professional Book Archive

Einloggen, um Zugang zu erhalten
insite
SUCHEN

Über dieses Buch

The articles in this volume were first presented at the Seventh and Eighth Conferences on Economic Issues in Workers' Compensation sponsored by the National Council on Compensation Insurance. A principal objective of the Conference series has been for workers' compensation insurance researchers to apply state-of-the-art research methodologies to policy questions of interest to the workers' compensation insurance community. This community is a rather diverse group--it includes employers, insurers, injured workers, regulators, and legislators, as well as those who service or represent these groups (e.g., physicians, rehabilitation specialists, labor unions). Despite this diversity and the variety of agendas, the Conference series continues to address many important policy questions. Readers familiar with the Conference series and the four previously published volumes should notice an evolution in terms of the topics addressed in this volume. In the earlier conferences, the topics were more often concerned with the underlying causes of the tremendous increase in workers' compensation benefit payments. In the present volume, h- ever, only four of the fourteen chapters directly concern workers' c- pensation insurance benefits, while the other ten concern the pricing of workers compensation insurance. This is not to suggest that workers' compensation cost increases have abated. In 1989, workers' compensation incurred losses exceeded $45 billion to continue the annual double-digit cost increases. Two explanations can be offered for the somewhat altered focus of this volume. First, despite the continued increase in prices, the financial results for the workers' compensation insurance line continue to be poor.

Inhaltsverzeichnis

Frontmatter
1. The Determination of Workers’ Compensation Benefit Levels
Abstract
The purpose of this chapter is to analyze the incidence of the cost of workers’ compensation (WC) benefits and to examine whose preferences are reflected in the benefit levels chosen. The standard assumption of economists is that the costs of WC benefits are borne by workers in the form of a compensating wage differential. Several empirical studies appear to confirm this hypothesis. Dorsey and Walzer (1983) conclude that for nonunion workers there is a fully offsetting wage differential for compensation benefits, although for union members they find a significantly positive correlation between wages and benefit levels. Viscusi and Moore (1987) conclude that “the observed rate at which workers are willing to trade off base wage rates for higher levels of compensation greatly exceeds the actuarial rate of trade-off, even taking into account administrative costs. These results suggest that current benefit levels are suboptimal, provided that one abstracts from moral hazard considerations.”1
Patricia M. Danzon
2. Workers’ Compensation Costs and Heterogeneous Claims
Abstract
The distribution of Workers Compensation claims are known to have thick tails so that even though claims are of relatively short duration a substantial amount of the indemnity losses are accounted for by claims that are very long in their duration. The former types of claims can be reasonably characterized as “high frequency/short duration” claims, whereas the later are “low frequency/long duration” claims. Duration and frequency are, of course, highly correlated with the type of claim. Temporary Total claims arising from lacerations, strains, and sprains are likely to be relatively high frequency events of short duration so that the claim indemnity costs are small per individual claim. In contrast, a permanent partial spinal cord injury is a relatively low frequency, but long duration, type of claim whose costs per claim are inevitably very large.
Richard J. Butler, John D. Worrall
3. The Transition from Temporary Total to Permanent Partial Disability: A Longitudinal Analysis
Abstract
There are more than 8 million workplace injuries per year compensated by private insurers or competitive state funds under the various workers compensation programs. Of these only 5 percent are sufficiently severe to result in permanent disability or the death of the injured workers, yet this subsample accounts for some 75 percent of all incurred claims costs. Identifying the more severe injuries is of substantial importance both in the estimating the costs of the workers compensation system, as well as in the effort to contain those costs.
John D. Worrall, David Durbin, David Appel, Richard J. Butler
4. The Transition from Temporary to Permanent Disability: Evidence from New York State
Abstract
Workers’ compensation is a social insurance program providing cash benefits, medical care, and rehabilitation services to workers disabled by work-related injuries or diseases. Workers’ compensation is one of the largest social programs in the United States. In 1984 almost 82 million workers were covered by workers’ compensation programs, which paid over 19 billion dollars in benefits (Nelson, 1988). In terms of benefits paid, workers’ compensation is larger than the Social Security Disability Income program, which paid approximately 18 billion dollars in benefits in 1984, and the several state and federal unemployment insurance programs, which paid about 15 billion in benefits that same year (Nelson, 1988).
Terry Thomason
5. Capital Flows and Underwriting Cycles in Liability Insurance
Abstract
Reported underwriting profits in property-liability insurance are characterized by significant cyclical fluctuations. The pricing pattern usually identified as the underwriting cycle is portrayed in figure 5-1, which shows the all-lines combined ratio for the period 1951 to 1987. Venezian (1985) identified the cycle as a second-order autoregressive process. The cycle in figure 5-1 is statistically significant and approximately six years in length. The presence of significant autoregression in prices and profits would not seem to be characteristic of a rational market (see, e.g., Abel and Mishkin, 1983). In property-liability insurance, however, cycles are not necessarily inconsistent with rationality. Cummins and Outreville (1987) have shown that cycles can occur in property-liability insurance markets even if prices reflect rational expectations. They demonstrate that intervention factors, such as policy renewal lags, information lags and regulatory delays, can create autoregressive patterns very similar to those observed in actual insurance markets.
J. David Cummins, Patricia M. Danzon
6. Self Insurance in Workers’ Compensation
Abstract
Employers can fulfill their obligations to provide for workers’ compensation coverage by purchasing insurance from a private insurance carrier, or from an insurance fund run by the state or by self-insuring. Eighteen states have state funds. Twelve of these compete with privace insurance carriers for business and are usually referred to as competitive state funds. The other states have exclusive state funds, and private insurance carriers are not permitted to sell workers compensation insurance in those states.
Richard J. Butler, John D. Worrall
7. On the Use of Option Pricing Models for Insurance Rate Regulation
Abstract
In the past decade, insurance regulatory authorities have witnessed the introduction of various economic or quasi-economic models for estimating the “fair” rate of return on equity. These models succeeded earlier rules of thumb such as the target of 5 percent underwriting profit. The economic model that has received most attention is the Capital Asset Pricing Model (CAPM). However, this model has serious flaws arising from its stylized treatment of taxes, its failure to consider the possibility of ruin, and the difficulties associated with measuring underwriting betas. More recently, models based upon option pricing theory have been applied to insurance pricing in an attempt to address at least some of the flaws of the CAPM. In this chapter, we discuss the use of option-based models for insurance pricing and will summarize two recent applications by the authors. We will then present specimen applications of these models using workers’ compensation data. For comparison, we show comparable results for the CAPM.
Neil A. Doherty, James R. Garven
8. Some Caveats for the Use of Forecating Models for Assessing Rates of Return in Workers’ Compensation
Abstract
A model, in the most general sense, is a simplified representation of reality, as it is, or as it is to come to be. The reality of interest may be a phenomenon, a system, a process, a living thing, that is, virtually anything. The simplification embodied in the representation may range from slight to extensive, from simple to highly sophisticated. All models are incorrect in some way; some models are useful; all, even good and correct models, are capable of being used in an inappropriate way. Complex economic models that have not been appropriately validated, preferably in at least two ways, are particularly dangerous.
A. S. Paulson, R. L. Boylan, L. T. Lim
9. Leverage, Interest Rates, and Workers’ Compensation Survival
Abstract
Potential insolvency has always played an important role in insurance regulation. In fact, concerns about the public interest are such that the insurance industry is required to establish guarantee funds so that, in the event a particular company is unable to meet its obligations to policyholders, the insureds would still be covered. Even so, the number and magnitude of insurance carrier insolvencies have risen dramatically in the past few years. Probably the most serious was the Mission Insurance Company in 1987. The original cost was estimated at $520 million, which has since grown to be in excess of $1.5 billion (New York Times, November 15, 1988). In addition, the size of the guarantee funds has grown eleven-fold in just the past four years to approximately $917 million in 1987.
John D. Worrall, Richard J. Butler, David Durbin, David Appel
10. Predicting Insurance Insolvency Using Generalized Qualitative Response Models
Abstract
The general problem of corporate or business failure is very important and can generate significant losses to creditors and stockholders. Models of predicting business failure have been studied by numerous authors including Aharony (1980), Altman (1968), Beaver (1967), Dambolena and Khoury (1980), Deakin (1972), and Zavgren (1983). The problem of predicting insolvency of insurance companies has become an important issue for the National Association of Insurance Commissioners as well as state and federal legislators. More than 130 property and casualty insurance companies have failed during the last ten years. Daenzer (1984) indicates that the total statutory underwriting loss for the period 1979 to 1983 is $33.7 billion. In an interesting article entitled “Is ‘A-Plus’ Really a Passing Grade?” Denenberg (1967) examined Best’s ratings for size and financial strength for the six years preceding insolvency and found that the ratings were useful in predicting solvency status. These ratings attempt to summarize many factors, such as quality of underwriting, management, adequacy of reserves, investment quality and a financial rating. This has provided a useful, but not a perfect, guideline of an insurance companies financial health.
James B. McDonald
11. Firm Characteristics and Workers’ Compensation Claims Incidence
Abstract
The research effort that underlies this chapter began with an intriguing discovery, namely, wide differences in litigation rates among the workers’ compensation case (WC) populations in different cities in Michigan that were demonstrated in a previous Upjohn Institute study (Hunt, 1981). The question of the possible WC cost impact of such differences became a policy issue in Michigan during the battle for the location of the new GM Saturn facility. Workers’ compensation costs in Michigan had risen significantly over the twenty years from 1958 to 1978, to the point that WC costs were a very significant negative element in the Michigan business climate (Burton, Hunt, and Krueger, 1985). If lower WC litigation rates in southwest Michigan could offset some of the cost disadvantage to a Michigan Saturn location, the Michigan Department of Commerce wanted to know about it.
H. Allan Hunt, Rochelle V. Habeck, Michael J. Leahy
12. The Impact of Experience-Rating on Employer Behavior: The Case of Washington State
Abstract
One of the purposes of the workers’ compensation system is to influence the level of injuries and illnesses at the workplace. While this is an important goal within the context of this program, it takes a broader social significance since the other major program for influencing workplace safety and health, the Occupational Safety And Health Act, has been widely acknowledged as unsuccessful (McCaffrey, 1983). Despite the critical nature of the issue, there has been a relatively small amount of empirical work on this subject.
James Chelius, Robert S. Smith
13. Risk Management Decisions When Effectiveness is Unreliable
Abstract
The three main tools of the risk manager are insurance, loss prevention (reducing loss frequency) and loss reduction (reducing loss severity). The latter two of these tools are referred to collectively as loss control. Typically, it is the goal of risk management to use these tools in an economically efficient combination to achieve desired reductions in a firm’s exposure to risk. The interactions of these tools is often apparent, such as when insurance premiums reflect a firm’s investment in loss control in order to award discounts to firms that have taken appropriate loss-control actions. Other interactions are often more obtuse, such as when insurance purchases cause a moral hazard, whereby a firm’s loss-control investment might not be maintained following the purchase of insurance. Since the effort of the firm in properly maintaining its loss-control investment is partly unobservable, we cannot be certain that a firm will not “slack off” on its loss-control activities following the purchase of insurance.
Harris Schlesinger
14. Economic Consequences of Third-Party Actions for Workplace Injuries
Abstract
Safety has been an issue of importance to business since long before the industrial revolution. The advent of industry, however, brought with it both a concentration of exposure to loss (many people injured simultaneously) and a complexity of loss potential through such environmental factors as use of synthetic materials. Demand for safety rose significantly as a result. Most attention to safety, however, was focused on workplace hazards. Not until after the 1965 Restatement of Torts (Second) did product safety become a prominent issue. Since then, and especially following the Report of the National Commission on Product Safety (NCPS), the economics of (product) safety has been a topic given substantial treatment in economic, legal, and insurance literature. Much of the existing literature analyzes the impact on efficient resource allocation of regulated safety standards, mandated compensation awards, and various liability schemes. In this article, the question of what effect third-party actions in work-related accidents have on safety is considered.
Joan T. Schmit
Backmatter
Metadaten
Titel
Workers’ Compensation Insurance: Claim Costs, Prices, and Regulation
herausgegeben von
David Durbin
Philip S. Borba
Copyright-Jahr
1993
Verlag
Springer Netherlands
Electronic ISBN
978-0-585-32530-9
Print ISBN
978-0-7923-9170-8
DOI
https://doi.org/10.1007/b102446