What Finance Leaders Need to Know About Mega Claims

Workers’ compensation claims often result in costly consequences for any organization. However, there is one type of claim that is threatening employers and comes with much greater consequences – the mega claim. As its name implies, a mega claim is defined as a claim of an exceptionally large amount. Mega claims usually total $3 million or more in incurred losses and most commonly stem from severe injuries or illness experienced by the employee while on the job.

Mega Claims Are on the Rise

Not only are mega claims more expensive for employers, but they are usually more complex and take longer to process than a common claim. In many cases, mega claims have a lasting impact on both the employee and the employer. Typically, employees receive mega claims as a result of life-altering injuries or illness, and employers are faced with substantial costs, lost time, and potential damage to their reputation.

While mega claims are less common than your standard workers’ compensation claim, in a study conducted by the National Council on Compensation Insurance (NCCI), they have shown to be on the rise over the last decade. Research by the NCCI shows that mega claims have reached a 12 year high in both the frequency and severity of the claims – posing a growing threat to both employers and their employees.

Mega Claim Statistics

The following statistics from the NCCI study highlight key insights into the latest mega claim trends and how to adjust your risk management strategy to address this growing issue:

• Mega claims are on the rise. Nearly 4,500 mega claims occurred between 2001 and 2017, with the claims reported between 2016 and 2017 representing a 12-year high. Of these claims, 57% totaled between $3 million and $5 million, 33% totaled between $5 million and $10 million, and 10% totaled over $10 million. This increase in mega claim frequency and severity has been attributed to several possible factors, such as changes in mortality patterns, medical advances, and a rise in health care costs.
• Some injuries and activities are more prone to mega claims. Brain and head injuries contributed to 17% of mega claims totaling between $3 million and $5 million, and 30% of claims totaling more than $10 million. In addition, accidents involving a motor vehicle comprised over 20% of overall mega claims.
• Certain sectors are at higher risk. Specifically, the construction industry contributed to 37% of mega claims totaling between $3 million and $5 million, 42% of claims totaling between $5 million and $10 million, and 46% of claims totaling over $10 million.
• Mega claims can develop over time. Less than half of reported mega claims reached the $3 million thresholds within 18 months from policy inception. Nevertheless, mega claims are still reaching the $3 million thresholds faster now than in decades past.

For additional workers’ compensation resources, risk management guidance, and insurance solutions, get in touch with Advantage Benefit Solutions today.