How High is Up?
- Gallagher Bassett
Let’s try to find something positive to talk about. How’s this—at least we don’t have pending claims stacked up in steel containers sitting off the L.A./Long Beach Harbor. Er… wait a minute. Maybe we do.* So many of the issues now confounding risk management across just about all lines of coverage are represented in the economic headlines about supply chains, materials shortages, the Great Resignation, and so forth. Add one more—inflation. In just the last few months, we have seen the following three aspects of inflation discussed in prominent risk management or related publications.
- Nuclear verdicts: There has been a recent increase in the number of nuclear verdicts** handed down by jurors, including the largest award from 2019: an eye-popping $8 billion. For defendants, this trend has generated even more uncertainty and anxiety about taking a case to trial. We explained well over a year ago in these pages the success of the plaintiff bar’s “reptile strategy” in securing more and more enormous awards. We haven’t seen anything better than the neat summary in Litigation Insights from a few months ago (What Causes “Nuclear Verdicts”? – Part 1 – Litigation Insights) on the growing frequency of these outsized verdicts and their impact on liability costs.
- Benefit indexing: Let’s take California as an example, since it represents over 10% of workers’ comp risk volume on average. From Workerscompensation.com, we learn that California’s State Average Weekly Wage (SAWW) rose more than 13.5% in the year ending March 31, 2021, which the California Workers’ Compensation Institute (CWCI) reports will lead to a record increase in temporary total disability (TTD) and permanent total disability (PTD) rates for 2022 job injury claims and other California workers’ comp benefits that are tied to SAWW increases (Sharp Increase in California Workers’ Comp Benefits Coming in 2022 | News For The Workers Comp Industry (workerscompensation.com). Other states have different mechanisms and timing, but we can expect the SAWW or equivalent to follow the same development everywhere in the near future.
- Global insurance prices: A recent article in Business Insurance (Global commercial insurance prices up 15% in Q3: Marsh | Business Insurance) pointed out a global increase of 15% in insurance costs. While the actual rises varied quite a bit from country to country and by the line of coverage, they were all heading in the same direction—up—as illustrated in this handy graphic:
In the ancient British ballad,* the Scottish king sends Sir Patrick Spens to Norway on official business—in the dead of winter. Sir Patrick’s sailing master says, “Now ever alack, my master-dear,/ I fear a deadly storm./ I saw the new moon late yestereen/ With the old moon in her arm;/ And if we go to sea, master,/ I fear we’ll come to harm.”
Weather forecasting has come a long way in the last seven hundred years or so. NOAA and other weather organizations have released their early forecasts for the winter of 2021/22, so now is a good time to review the probabilities for excessive cold, snow, ice, and the attendant issues, like grid failures, that may come along with weather extremes. Remember the “Big Freeze” in Texas this past winter? We are still feeling the aftereffects in the cost of certain petrochemicals even now.
One site we like is AccuWeather (AccuWeather’s 2021-2022 US Winter Forecast | AccuWeather), which amalgamates the predictions from a number of sources into a single view of likely temperatures and precipitation. We would also like to recommend a very useful discussion of winter prepping vis-à-vis workers’ comp and safety planning published by our friends at MEMIC (Getting Ready for Winter Weather | News for the Workers Comp Industry (workerscompensation.com)). MEMIC is, of course, located in Maine, where cold is an art form. This short essay includes a number of embedded links to other information sources, so it provides a handy guide to getting ready for winter and all its ramifications, such as a higher risk of car accidents, hypothermia, frostbite, carbon monoxide poisoning, and heart attacks from overexertion. Oops—I think we left out snow blindness.
Winter prep has two parts. The first part is the obvious precautions taken on your premises: winterizing your cars, trucks, and other outside equipment; having salt ready for walkways and mats ready for entryways; and tuning up your HVAC so your people don’t have to wear parkas to their workstations. The second part may be less obvious. What can you do to help your employees cope better with winter extremes at home and, especially, in getting to and from work sites? Are the folks who have returned to the office ready to plug back in to work from home quickly when a blizzard or an ice storm closes in? Is your notification process for snow days up to date and well understood by all? Are their personal vehicles properly winterized? Every season has its repertoire of sucker punches, but winter’s collection is especially vicious.
Bear in mind the fate of Sir Patrick and his crew in the last stanza: “O forty miles off Aberdeen,/ ‘Tis fifty fathoms deep,/ And there lies good Sir Patrick Spens/ With the Scots lords at his feet.”
*There is much controversy about the actual events behind the old ballad, but it is thought to date from around 1290.
Workers’ Comp and the Opiate of the Masses
Back in the ‘60s, a friend turned Karl Marx on his head and proclaimed that opium was the religion of the masses. At a time when the youth of America was trying every drug in the pharmacopeia—especially magic mushrooms, LSD and pot—this seemed very witty and apropos. Who knew that half a century later, opiates—and especially synthetic opioids—would be the bane of injured, middle-aged plumbers, or just about anyone with tired bones?*
The indefatigable** researchers at the Workers’ Compensation Research Institute (WCRI) have just published their review (free at www.wcrinet.org to members) of the impact of changes in state regulations and claim practices on the use of opioids. We have highlighted in a recent issue the overall gratifying decline in the use and costs of opioids in comp over the last decade. WCRI’s research gets into the details and looks at what regulatory changes have had the biggest bang in terms of reducing the inappropriate/excessive use of opioids in treating comp injuries. Turns out that not all changes have the same impact.
The two most effective controls were:
- Must-Access Prescription Drug Monitoring Programs—These are the programs that require all prescriptions for opioids to go through a central control point to block multiple prescriptions. This prevents the injured employee from “stacking” scripts from several doctors. This is important for both comp and group health benefit plans.
- Limits On Initial Opioid Prescriptions—By limiting the first script to a supply for three to seven days (varies from state to state), total opioid prescribing has been effectively limited. Repeat scripts require a review and authorization process, preventing most potential overuse scenarios.
These programs have reduced opioid use, and related costs, significantly, but it should be noted that lowered opioid prescribing appears to have little or no impact on total claim durations, which may be a bit of a surprise. There may also be a slight but noticeable cost offset in that claims with reduced opioids often have an increased use of NSAIDs or other non-opioid pain relievers.
Our non-scientific conclusion is that serious musculoskeletal injuries still hurt, hence all those NSAIDs, and take many weeks to heal properly, but these two interventions help to close the door on possible opioid addiction resulting from overuse of these drugs in treating a comp claim. Not wasting money is good, but not wasting lives is vastly more important.***
Kudos to Dr. Bogdan Savych and his colleagues at WCRI for another excellent and useful piece of research. Oh, and speaking of the ‘60s, has anyone noticed that medical and neurology journals today are full of articles about using psilocybe cubensis derivatives (the magic in magic mushrooms), different LSD analogs and THC plus other marijuana derivatives to treat a long list of diseases? We like to think of progress as a straight line, but what if it’s really a loop?
*Yes, you are indeed older than dirt if you remember those ads for a certain iron supplement as the cure for “tired blood.”
**An especially applicable term for WCRI’s tireless scholars and statisticians. The HMS Indefatigable was one of the Royal Navy’s Implacable class of aircraft carriers in WWII.
***In case you’re wondering, internal analytics at GB, while not duplicating the WCRI research approach precisely, show much the same results in aggregate, looking across all comp clients.
Quick Take 1:
Thin Turnout But Thick Content
Joe Paduda valiantly put his shoe leather and feet at risk* to attend the National Workers’ Compensation and Disability Conference three weeks ago in Las Vegas at the Mandalay Bay Hotel—where everything is as far as possible from everything else—so we didn’t have to. His summary may be perused in a recent issue of Managed Care Matters (MCM)(National Work Comp – general impressions – Managed Care Matters (joepaduda.com)). Like most regular industry conferences (RIMS, for example), this assembly is part serious information sharing and part seeing the old gang and exchanging a ton of industry gossip.
Here is Joe’s précis of the latter part:
- attendance was way down,**
- many companies didn’t attend,
- this country hasn’t gotten back to “normal,”
- which means claims counts are still low
- and premiums are too.
Despite the light attendance, a good many serious topics got a thorough discussion in several venues. Artificial intelligence was a major topic in just about every possible flavor. AI seems to be making the transition from gee-whiz “what if” presentations to real “here’s what we are doing and here’s how it’s working” sessions with actual information and results. (Indeed, rumor has it that the chairman of a household name carrier laid down the law about making the big plunge into AI just a couple of weeks ago.) Another big topic was the flood of retirements, resignations, and general moving on of senior adjusters across the industry. The Great Resignation is not skipping comp and disability, it appears.
Note that AI is one of the serious contenders for supplementing enhanced adjusting processes. The point is not to replace adjusters but to put more resources at their fingertips. We were also delighted to see this item in Joe’s roundup as well: “adding behavioral health expertise to the claims management process will help reduce claim inventory, further reducing adjusters’ work load.”
Check out the full summary at MCM. It doesn’t replace the complete exhaustion, the tinnitus from hearing all those slot machines chiming, the feeling of burned jet fuel in the back of your throat, the PTSD that sets in after trying to match names to so many sort of familiar masked faces, but it’s almost like being there.
*Having been a regular for oh so many years, my feet hurt just thinking about it.
**Joe’s observation. On the other hand, my GB colleagues tell me that many functions, like the GB reception, were very well attended, despite a relative lack of traffic on the conference floor. Seems to depend on which venues you frequented.
Quick Take 2:
Droning On? An Update.
Like their high-tech cousins, the self-driving cars, drones got off to a fast start for a handful of obvious applications, as we noted recently in our update on drone use by insurance carriers. But other predicted uses for drones have been much slower to catch on. An ABC News item (Walgreens begins testing drone delivery in Texas – ABC News (go.com)) on a new beta test in Frisco, Texas, by Walgreens and Wing (Alphabet/Google’s drone subsidiary), provides an excellent illustration of why the skies are not full of drones buzzing back and forth. Yet.
Wing has been running small-scale drone tests for some time in out-of-the-way places, such as parts of Virginia, Australia, and Finland. The technology seems to be working well. The drones can fly either under human control or autonomously, and they appear to be reliable. The obstacles are more down to earth. As we have noted in earlier essays on drone trials, licensing, liability, and nuisance issues have yet to be resolved. Some people don’t like the idea of drones buzzing overhead and having a direct view into formerly “private” areas like backyards.
Perhaps even more to the point is this trenchant observation in the ABC News article: “There’s also not much evidence that American consumers have been clamoring for airlifted packages…” This brings up the question that haunts the tech business in so many areas of endeavor: At what point do we users/customers begin to feel technological satiety? Do we really feel a need for that next new app or tech-based service,* especially if it has a cost attached, whether that cost is monetary or something else—such as the nuisance of having a drone buzzing past our bedroom window?
So many new tech offerings—from drone deliveries to dazzling new IoT devices—bring with them new and challenging risks, as we have been noting in this Journal. But perhaps the biggest risk issue, whether you are the provider or the customer, is the most basic question: Do we really need this? Will the payoff justify the risk costs? The last couple of decades are littered with shiny new ideas that didn’t pan out (Palm Pilot anyone—or how about a Segway?). Perhaps one of our tasks as risk managers is to be the person at the meeting who asks of a bright, new techy proposal, “Does anyone really need this?”
Keep in mind, that it is not the place of risk management to win popularity contests. Our place is to ask hard questions and demand honest answers.
*Yours truly spent some time two weeks ago selecting a new washing machine that was (a) not sitting on a container ship off a harbor somewhere and (b) not hooked up to the internet or even “smart” in some way that pretty much guaranteed service problems down the line.
Say It Isn’t So…
A little over a year ago, we said this might happen. According to Minnesota Public Radio, we nailed it:
A high school in California is now training teens to enter the industry [trucking] through its truck driving school program. Patterson High School in Patterson, Calif., is one of the first non-vocational high schools in the country to offer a truck-driving program for students.
Your humble correspondent used to drive a GM cab-over with a 14 speed Spicer and twin Kragar pipes about 50 years ago. Makes everything else on the road look like a motorized roller skate. Yee-haw.
Courtesy of Gallagher Bassett
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