In the Aftermath of September 11, 2001—Workers Compensation
October 2001
This article expands on the one above, highlighting
some online resources that might be useful in addressing WC claims resulting
from the events of September 11, 2001, reviewing the current state of the WC
market, and presenting some thoughts about renewal strategies.
by Christine Fuge
IRMI
In the wake of the events of September 11, 2001, much conjecture has been
made about how the insurance industry and its policies will respond to the disaster.
We have issued a two-part discussion, Attack on America:
The Insurance Coverage Issues detailing information on these issues by line
of coverage. The focus of this discussion will be on providing additional commentary
on workers compensation by highlighting some online resources that might be
useful in addressing claims resulting from the events of September 11, 2001,
reviewing the current state of the workers compensation market, and presenting
some thoughts about renewal strategies.
Online Resources
Since the determination of the compensibility for injuries and deaths resulting
from the disaster will fall to the jurisdiction in which the claim is filed
(there are 51 of these jurisdictions, plus the federal workers compensation
acts), the Internet can be an especially helpful tool in searching out information
about the applicable state's workers compensation act and its administrative
rules, the claim process, and what benefits the claimant is entitled to under
act provisions. A couple of the states and the federal agency expecting to see
the bulk of the claims have established specific Web pages to facilitate the
filing of claims by survivors.
The page developed by the New York Workers
Compensation Board contains information on the forms that must be filed
to process a claim as well as the timeframe in which the documents must be completed
and returned to the Board. The page also provides claim handling phone numbers
and links to other information on the Board's website that the claimant might
find useful.
The New Jersey Department of Labor, Division
of Workers Compensation, has made available benefit information and insurer
addresses, phone numbers, and websites on their Web page devoted to claims
arising from the actions on September 11, 2001.
The Federal Employees' Compensation Act (FECA) provides workers compensation
coverage to civilian employees of the federal government and is administered
by the Office of Workers Compensation Programs (OWCP). The OWCP
Web page has been developed to assist injured civilian workers and survivors
of civilian workers in the processing of their claims resulting from the events
of September 11, 2001.
As to the remaining workers compensation jurisdictions, IRMI.com's Resource Directory will take the
user to the government and nonprofit organization directory where the category
"State workers compensation administrative agencies" can be selected. The user
will find Web links to all state workers compensation agency homepages so that
specific information about a state's workers system can be reviewed.
State of the Workers Compensation Marketplace
The workers compensation marketplace that had already hardened considerably
prior to September 11, 2001, now seems headed even further in that direction.
With 6,800 people missing and presumed dead from the attacks, workers compensation
payments in excess of $1 billion have been predicted. This alone would be a
huge loss to insurers and reinsurers, but coupled with losses stemming from
the events that are likely to be paid on other lines of coverages, an enormous
financial burden rests on the insurance industry.
Premiums are likely to continue going up, and capacity likely will be reduced.
To quote one broker, "The give is gone." Even excellent accounts can now expect
to see significant price increases and fewer coverage enhancements being made
available. In the 2 weeks since the attacks, preliminary premium indications
given prior to September 11, 2001 have materialized into actual quotes in many
cases 50 percent higher than the original indication. There have also been several
instances reported where quotes on the table have been withdrawn due to the
loss of reinsurance. Whether or not this is a knee-jerk reaction will not be
known for months to come. The performance of the world economy and the actual
losses paid stemming from the events of September 11 will drive the reinsurance
market and ultimately the pricing and availability of workers compensation insurance.
Renewal Strategies To Consider
With the uncertainty and the further hardening of the market, a different
approach to renewal than was utilized in a soft market is dictated. Following
are some key steps to consider when developing a renewal strategy.
- First, begin the renewal process well in advance of the renewal date.
- Review the entire workers compensation program to assure that the total
costs are balanced properly among the components to assure that loss control,
safety programs, and claim handling are receiving the appropriate emphasis
as part of the overall risk management effort to control costs.
- With premium costs rising, analyze the various program design options
available. Is the use of deductibles, retros, self-insurance, or captives
feasible?
- For organizations with significant losses, learn more about the programs
offered by the workers compensation residual and competitive markets as
these may become the only option available. The IRMI.com Resource Directory will take
the user to the government and nonprofit organization directory where the
categories "Workers compensation assigned risk plans and pools" and "Workers
compensation competitive state funds" can be selected. These links will
provide the user access to contact information for these organizations,
including their websites if they have one.
- Prepare a complete underwriting submission that clearly quantifies the
organization's exposures and losses and identifies the mechanisms in place
to prevent and control future losses.
- Get all communications from the broker and insurer in writing. This
is especially important in this market where several insurers have withdrawn
quotes after presentation to the insured before coverage is bound.
- Finally, prepare management for renewal pricing by apprising them of
the condition of the workers compensation marketplace.
Note: See other terrorism articles
on IRMI.com.
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