There is a real benefit to reporting losses immediately after they happen. This is particularly important in workers’ compensation insurance. The time between the occurrence of the loss and the reporting to the insurance carrier is called lag time, and is usually measured in days.
Glen-Roberts Pitruzzello, an actuary and pricing analyst with the Hartford, did a definitive study on the average cost of workers’ compensation claims based on lag time. His findings, which involved analysis of 53,000 claims, are more than compelling. Injuries reported within 1-2 weeks are 18% more expensive than those reported within 1 week, and injuries reported after the 4th week following an injury are 45% more expensive.
Beyond the insurance costs of late reporting, here are three other reasons why early reporting is important.
Reason #1: Early reporting means early treatment. Once an injury occurs, we want to get the employee medical attention as soon as possible. Delayed treatment can mean an increased chance of infection, aggravation of the injury or injury to other parts of the body. In many cases, early treatment results in better outcomes for both the employee and the employer.
Reason #2 – Early reporting allows for corrective action. This allows the management team to conduct a prompt and thorough investigation, identify causal factors and establish corrective actions to prevent recurrence.
Reason #3 – Early reporting alleviates suspicion. Unfortunately, workers’ compensation fraud does occur. When an injury is reported late, it can arouse suspicions and the employee/employer relationship may become adversarial.
Defining the Problem
It is a simple task to track lag time. Most insurance carriers easily capture the time between the day of occurrence and the date reported. But what most do not recognize is that there are actually three lag times, each of which may have different causes.
The first is a lag between the day of the injury and when the employee informs their supervisor. The second lag time involves how long it takes the supervisor to inform the front office. The third lag time is the delay in the injury being reported to the insurance carrier by company personnel.
The carrier doesn’t capture this data. Therefore, it is important to find where the problem lies locally if you want to change it. The first step is to establish standards. Many organizations use a three-day threshold, allowing one day for each of the three lag times previously mentioned.
Once standards are set, the next step would be to track the losses in all three lag time areas. The final step would be to uncover the cause behind delays in the lag time areas. Here are some potential causes:
Reasons employees delay reporting to the supervisor
Fear of Discipline: Organizations that rely on a program where discipline results when someone gets hurt can encourage employees to not report claims.
Peer Pressure: Sometimes coworkers will encourage not reporting injuries because of safety goals or some cultural norms.
Perceived hassle: Oftentimes when employees report an injury, they tend to avoid situations that make them uncomfortable.
Embarrassment: When employees have an injury, they are often embarrassed and do not want to draw attention to their actions.
Perceived minor injury: The employee may underestimate the seriousness of the injury.
Reasons supervisors delay reporting to the front office
Perceived hassle: No one likes to fill out an accident form, they can be challenging to complete and are sometimes observed as having no value.
Perceived failure: Some supervisors feel that they have personally failed when one of their employee gets hurt on the job. At times, those feelings may be justified.
Perceived minor injury: As with the employees not reporting minor injuries, the supervisor may feel that the injury is not serious enough to be reported.
Management pressure: Management can create the impression, implied or implicit, that reporting a loss will not be looked at favorably.
Interferes with primary tasks: Supervisors have a lot to do on a normal day so reporting the injury may be a secondary concern or avoided entirely.
Reasons the front office delays reporting to the insurance carrier
Perceived hassle: Sometimes the method of reporting can be difficult, time-consuming and frustrating.
Conflicting priorities: Very few organizations are large enough to have an employee dedicated to just reporting claims and there may be other tasks to perform that are seen as higher priorities.
Informal retention (Med Only): Some organizations purposely retain some apparently simple injuries and pay the medical provider directly in an attempt to keep their workers’ compensation insurance premium low. If a seemingly benign injury becomes more complicated, then a late claim is filed, often along with an excuse for the late reporting. .
Once an organization accepts that their lag time is a problem, identifies the type(s) of lag time they have and discovers the reasons for delay, then they can proceed to fix their problem. Promptly reporting employees’ occupational injuries and illnesses improves outcomes, reduces costs and creates a stronger relationship with the insurance carrier.
*The views and opinions expressed in the Public Risk Management Association (PRIMA) blogs are those of each respective author. The views and opinions do not necessarily reflect the official policy or position of PRIMA.*