Expert Commentary

In the Aftermath of September 11, 2001—Workers Compensation

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.

Workers Compensation Issues
October 2001

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,'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 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

Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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