Exclusively from Foa & Son
The National Council on Compensation Insurance (NCCI) is a national ratemaking and statistical organization. Three dozen states subscribe to NCCI, but much of the information they publish is applicable even in those that don’t.
NCCI recently published their findings from a study on workers compensation and aging workers. The results are interesting for any employer.
• In looking at WC claim costs per worker, differences were still found in claim costs by age (with older workers costing more), but the data indicated that “older” starts at age 35, with all groups of workers aged 35 to 64 having similar costs per worker. Workers in the 20 to 24 age group have markedly lower severities and claim costs and workers age 25 to 34 fall in the middle.
• The long-standing assumption that younger workers have much higher injury rates is no longer true. Differences in injury frequency by age have virtually disappeared.
• Differences in leading types of injuries are a major factor in differences in severity by age. Older workers tend to have more rotator cuff and knee injuries while younger workers have more back and ankle sprains.
• On the indemnity side, higher wages are a key factor leading to higher indemnity costs for older workers.
• With medical costs, older workers were found to receive more treatments per claim.
In their conclusion, NCCI notes that differences in injury frequency by age group, which were pronounced as recently as fifteen years ago, have largely disappeared. Frequency rates respond to safety management, so it’s reasonable to infer that better attention to safety management by employers has had an impact here.
Injury severity and claim costs for older workers is roughly 50% higher than for younger workers. These higher loss costs for older workers are driven by three identifiable factors. Variation in the mix of types of injuries accounts for approximately half the difference in loss costs. For the rest, the key factor for differences in indemnity severity was higher wages generally paid to older, more senior workers leading to higher benefits being paid. On the medical cost side, the key factor driving higher costs for older workers was simply more treatments per claim.
From an insurance cost perspective there is a partial offset to the higher costs of claims older workers generate. This is because they generate higher premiums than younger workers, due to the higher wages older workers generally earn. Other sources have also reported on the higher productivity generally found in an older workforce. Add it up and the higher loss costs from older workers are substantially mitigated when offset against the higher premiums they generate and by their increased productivity.
These findings can be viewed as reassuring, in that an aging workforce has a less negative impact on loss costs than might have been originally thought.