Workers Comp. and Unemployment
Breaking news from California:
The Workers' Compensation Insurance Rating Bureau (WCIRB) made it official and submitted a mid-year filing for a 9.1% increase in the pure premium advisory rate that Insurance Commissioner Dave Jones approved less than six months ago. The proposed July 1 increase follows the 37% increase that Jones approved for January 1 that was hidden by the change in benchmarks for pure premium rates that was made at his request....
The Bureau insists that an increase of this magnitude is necessary to combat the continued deterioration in the claims experience, as well as an uptick in claim frequency in the 2010 accident year. Much of the increase will also go to pay for the higher loss adjustment expenses carriers are incurring fighting liens and litigating permanent disability claims. Projected ALAE costs are up to $11,403 per indemnity claim for the 2011 accident year compared to $10,698 the year before.
A 9.1% increase a half year after a 37% increase is just crazy. This tends to confirm three issues I have written about before:
- People are filing workers comp claims as a substitute for or a supplement to unemployment. Our company has seen a significant increase in people "coincidentally" suffering an injury on one of the last few days, and particularly the very last day, before they are to be laid off. Only such fraud explains an increase in claims when economic activity is way down, particularly when more dangerous professions like construction employment fell much more than office employment in the recession. We have also seen, by the way, an increase in frivolous labor lawsuits in CA coincident with the economic decline. A year ago I had an employee in CA tell me that she had attended a brainstorming session the night before among several of my ex-employees trying to generate ideas for ways to sue our company. I can't wait for an improvement in the economy when the returns of working are higher than the returns of brainstorming ways to extract money from our company via the legal system.
- California in general does a bad job of policing workers comp. fraud. Woe to the employer that actually attempts to question an outrageously suspicious claim. Last time I tried to do so in CA I got slapped with a lawsuit.
- All states do a terrible job policing permanent disability claims. I hire a lot of older workers. I can't tell you how many people show up at my door trying to be paid under the table because they don't want to endanger their permanent disability by having a record of getting paid for doing very physical outdoor work for us. They assure me they are 100% capable to do heavy physical labor. Since I don't pay anyone off the books, they end up finding work elsewhere. Many of you may not believe such people exist, but I have met a number of folks who consider getting a permanent disability, or at least something a doctor will testify is a permanent disability, the equivalent of hitting the lotto. I have even been sued by a woman for submitting testimony to the social security administration that might have harmed her chances of getting a permanent disability ruling. The lawsuit stated that if she was denied the disability payment after I testified that I had seen no evidence of any limitations in what she could do on the job, that I should be liable for paying her the lifetime amount she would have gotten. So I wimped out and withdrew my testimony and let the taxpayers pay her rather than farting around with a lawsuit.
