Financial executives for mid-sized companies expect greater productivity savings by reducing workers’ compensation claim costs than by reducing claim costs for other lines, according to a new survey commissioned by Wausau Insurance.
Two-thirds of survey respondents said they save at least $2 in lost productivity expenses for every $1 saved by reducing workers’ comp claim expenses. And nearly 60 percent save at least $1 in lost productivity expenses (and related uncovered loss of value) for each $1 saved by reducing claim costs for general liability, property and commercial auto lines.
The survey of 208 financial executives, the first annual Wausau Multiline Productivity Poll, was conducted by Boston-based market research firm Atlantic Research & Consulting.
“We’re challenging mid-sized insurance buyers to think about risk in a new way, by posing questions some haven’t pondered about the ultimate cost of risk,” said Joe Gilles, president and chief operating officer of Wausau Insurance. “For example, the perception that there are greater productivity savings from workers’ compensation may be under-estimating the potential of other types of claims. We believe every line has the potential to significantly enhance productivity.”
Gilles said the survey findings for workers’ comp seem generally consistent with various industry estimates (including the Occupational Safety and Health Administration) that peg the ratio of indirect to direct costs at 2-1 or 3-1. A Liberty Mutual-sponsored survey of financial executives for mid- to large companies in 2001 found a median ratio of 3-1. Some estimates for workers’ comp have ranged even higher. However, there has been comparatively little industry focus on the potential indirect costs (lost productivity and related uncovered loss of value) of claims for property, general liability and commercial auto.
“With this survey, we want to expand the focus beyond workers compensation,” Gilles said. “The direct claim costs of workers’ compensation have been called the tip of the total cost ‘iceberg’ by some experts. We believe a similar analogy may apply to other lines once the ultimate cost, and uncovered loss of value, from those claims become more clearly understood.”
Gilles cited several other significant findings in the survey:
— Executives from upper mid-sized companies (more than 500 employees) generally report higher productivity savings by reducing claim costs in all lines than executives from lower mid-sized companies (between 100- 500 employees).
— Nearly 90 percent of respondents have combined at least two lines of commercial insurance with one carrier.
— Nearly three-quarters of executives say they achieved significant
efficiencies (saving at least 4 percent per year) by integrating at
least two lines of insurance with one carrier.
— General liability and property (two coverages commonly combined in
Package policies) were cited as the two lines most likely to achieve
significant efficiencies when combined with one insurance carrier.
Gilles said Wausau will continue to explore the ultimate costs of lost productivity across the major lines of commercial insurance. The Wausau Multiline Productivity Poll, which can be viewed on the company’s Web site, http://www.wausau.com/poll , will be updated and revised periodically as a tool to shed new light on the issue.
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