NCCI monitors trends in workers compensation loss drivers, both on a countrywide and individual state basis. In this article, we share the highlights of our annual review of frequency and severity trends for all NCCI states combined, with a focus on accident years (AYs) 2011 to 2016. The source of the data is NCCI’s Statistical Plan, which contains detailed policy information that allows us to analyze frequency and severity by various claim characteristics.

To be consistent with financial information published by NCCI, this analysis excludes large deductible policies. NCCI also examined data including large deductible policies—and the trends are similar.

Overview of Changes in Frequency and Severity

Workers compensation has experienced a long-term decline in overall claim frequency. NCCI points to automation, robotics, and continued advances in safety as contributing factors. While total claim severity has increased, frequency declines have generally outpaced severity increases.

These cumulative changes in frequency and severity above translate to annual changes of –4.2% and +2.5%, respectively, over the period of AYs 2011 to 2016.¹

The +13% cumulative increase in total severity is composed of a +16% change in medical severity and a +9% change in indemnity severity. In AY 2016, the average undeveloped cost of claims with lost wage benefits was approximately $39K. This figure is likely to develop upward before reaching its ultimate level.

Two potential contributing factors are changes in industry mix and changes in the share of claims involving lost wage benefits. Changes in industry mix have not been a significant contributor, accounting for about one point of the overall frequency decline and severity increase, respectively. Specifically, after controlling for changes in industry mix, the cumulative changes over the period in frequency and severity above become –18% and +12%, respectively. The share of claims involving lost wage benefits has remained stable over the period at about 25% of claims and over 90% of losses.

Changes in Frequency and Severity by Industry

The cumulative changes over the period in frequency and severity differ by NCCI’s major industry groups: Manufacturing, Contracting, Office and Clerical, Goods and Services, and Miscellaneous. For frequency, the Miscellaneous industry group had the smallest decrease while the Office and Clerical industry group had the largest decrease. For severity, the Contracting industry group showed the largest increase while the Miscellaneous industry group had the smallest increase.

A Closer Look

We reviewed the overall changes in frequency and severity from AYs 2011 to 2016 above in more detail by grouping claims by three injury descriptors:

Size of Loss
We examined frequency by Size of Total Loss after adjusting all claims for inflation.² Claims above $500K stood out from other groupings with the smallest cumulative frequency decline of –3%. These claims accounted for less than 1% of claims with lost wage benefits and about 16% of total losses in 2016.

Part of Body
Of the major Part of Body categories examined, lower back claims, which accounted for 13% of claims with lost wage benefits in 2016, exhibited the largest cumulative frequency decline of 30%.

In contrast, the frequency of arm/shoulder injuries, which accounted for 18% of claims with lost wage benefits in 2016, declined by only 13%. This is the continuation of a trend that we have been observing for several years, whereby arm/shoulder injuries have been declining at a slower rate than all claims.

As noted above, the average undeveloped cost of claims with lost wage benefits was about $39K in AY 2016. Claims involving injuries to the head or brain continue to be the most severe, typically costing more than twice as much as the average claim. Injuries to the neck and spine cost about 75% more than the average claim.

Cause and Nature of Injury
NCCI’s Cause of Injury groupings include burn, cut/puncture, fall/slip, strain, motor vehicle, etc. Claims involving motor vehicle accidents increased in frequency by more than 5% from 2011 to 2016 while frequency decreased for all other Cause of Injury groupings that we analyzed. Motor vehicle accident claims are the most expensive cause of injury grouping, costing nearly twice as much as the average claim with lost wage benefits.

Nature of Injury groupings include amputation, concussion, fracture, laceration, infection, sprain, strain, occupational disease, multiple injuries, etc. Frequency declined for all Nature of Injury groupings with the exception of multiple injuries, which experienced a cumulative frequency increase of 22%. This is primarily due to the rise in motor vehicle accidents, which accounted for 23% of multiple injury claims in 2016.

For more information, see NCCI’s research brief, “Motor Vehicle Accidents in Workers Compensation” on ncci.com.