Monday, October 18, 2010

NCCI Reports Continuing Decline in Claim Frequency

According to NCCI claim frequency decreased in 2009 by 4.0% from 2008 (last year the annual decline was 3.4%). This continues a twenty-year downward trend that is expected to extend into 2010. You can read the full research report on its website,

Much of the reason for the current decline is the weakness in the job market. My colleagues and I often speculate about the impact of recession and recovery on claim frequency. NCCI's research explains it this way:

". . . economic recessions typically put additional downward pressure on claim frequency. This is because, during recession, there is less ― 'job creation', which translates into a more experienced, and thus less accident-prone, workforce. Additionally, during recessions, heightened ― 'job destruction' puts upward pressure on frequency as laid off workers may look to workers compensation for wage continuation. Taken together, NCCI research concludes that, during recessions, the impact of lessened job creation outweighs the impact of heightened job destruction, thus causing frequency to drop more than it would otherwise. During economic recoveries, as job creation picks up and job destruction abates, the proportion of inexperienced workers increases, thus putting upward pressure on frequency. However, unless the economic recovery is vigorous, this upward pressure is weaker than the general downward trend in frequency."

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