April 7, 2003

Annual Liberty Mutual Workplace Safety Index Shows Direct Costs of the Three Leading Causes of Workplace Incidents Grew Significantly Faster...

CHICAGO
The cost of disabling workplace injuries and illnesses grew faster than inflation between 1998 and 2000, while the direct costs of workers compensation claims are concentrating in a relatively small number of injury causes. Liberty Mutual, the leading provider of workers compensation insurance, products and services, today announced these and other findings on safety in the U.S. workplace with its annual Workplace Safety Index.

Highlights from this year's Safety Index include:

  • The direct cost of claims from disabling work-related injuries and illnesses grew 8.3 percent --2.5 percent after adjusting for inflation -- between 1998 and 2000, to $42.5 billion. During the same period, the frequency of disabling workplace injuries fell a little more than 1 percent, according to the federal Bureau of Labor Statistics.
  • The top three injury causes were responsible for 51 percent of the direct costs in 2000, up from 46 percent in 1998. The direct costs of the three leading causes of work-related injuries grew at rates substantially greater than inflation:

Overexertion - grew 12 percent after adjusting for inflation

Falls to Same Level - rose 17 percent after adjusting for inflation

Bodily Reaction - grew 13 percent after adjusting for inflation

  • The top 10 injury causes account for 89 percent of the total direct costs in 2000, up from 86 percent in 1998.
  • A small percentage of workers compensation claims continue to be responsible for the bulk of direct costs - In 2000, disabling workplace incidents were 18 percent of workers compensation claims, but 93 percent of direct costs.

This is the third year researchers at the Liberty Mutual Research Institute for Safety developed the Workplace Safety Index. This year, the Index calculated the inflation-adjusted growth in direct costs by using the Consumer Price Index to measure wage payments to injured workers, and the Medical Care component of the Consumer Price Index to track work-related medical care expenses. A disabling incident results in an employee missing six or more days from work. The direct cost of a workplace incident consists of medical and lost wage payments to injured workers and their healthcare providers.

The full results of the Liberty Mutual Workplace Safety Index - including the ranking of the top 10 causes of disabling workplace injuries based on their direct costs - are available at www.libertymutual.com

Employers feel the magnitude of workplace injuries twice -- the injury to an employee, and then the costs stemming from that event, notes Karl Jacobson, a senior vice president of Loss Prevention at Liberty Mutual. By identifying the leading causes of disabling workplace injuries and illnesses, the Safety Index gives employers a view of those areas in their operation that are the most costly in both human and economic terms. The findings also underscore the total financial impact of workplace injuries. While $42.5 billion in direct cost is significant, it is only a portion of the total costs of work-related injuries.

An earlier Liberty Mutual survey found that 93 percent of executives saw a relationship between the direct and indirect costs of a workplace incident. Indirect costs include the overtime, training and lost productivity related to an injured employee not being able to perform their normal work. Fully 40 percent of managers reported that each $1 of direct costs generated between $3 and $5 of indirect costs. Using this formula, according to Brian Melas, a senior vice president of commercial insurance at Liberty Mutual, the direct costs of disabling workplace injuries in 2000 produced between an additional $127 billion and $212 billion of indirect costs, bringing the total financial impact of disabling workplace incidents to between $170 billion and $255 billion.

By removing consumer and medical inflation to show real growth in direct costs of disabling workplace injuries, the Safety Index lets us look for the drivers of that growth, notes Mr. Melas. According to Mr. Melas, potential factors influencing real growth may include:

  • Advanced medical treatments becoming standard - More expensive treatments and prescription drugs are becoming more widely used.
  • Increasing medical utilization - The number of medical visits involved in an individual claim is growing. Claims that resulted in one or two visits to a medical provider in the past now result in three or four appointments.
  • Regulatory changes - Many jurisdictions have broadened their definition of work-related injuries, requiring the workers compensation system to cover many medical conditions that formerly fell outside the scope of the system.

METHODOLOGY
The annual Liberty Mutual Workplace Safety Index identifies the direct costs of disabling workplace incidents and the top 10 causes of these based on data from the Bureau of Labor Statistics, the National Academy of Social Insurance, and Liberty Mutual. This year's Workplace Safety Index reports trends by comparing findings for 2000 to those from 1998. To adjust for inflation, 2000 findings are reported in 1998 dollars.

The 2003 Safety Index was prepared by the Liberty Mutual Research Institute for Safety, as part of its ongoing efforts to help employers better protect workers and minimize the total cost of risk. The first step in developing the Safety Index was to apply Liberty Mutual 2000 workers compensation claims cost data to the workplace injury frequency information provided by the federal Bureau of Labor Statistics for injuries occurring in that year.

To provide a broader perspective, the relative proportions of each injury type were applied to national estimates of the cost of workers compensation benefits from the National Academy of Social Insurance, which includes information from a broad range of workers compensation insurance providers.

Boston-based Liberty Mutual Group is a diversified international group of insurance companies and one of the largest multi-line insurers in the North American property and casualty industry. The group has more than $50 billion in consolidated assets, more than $13 billion in consolidated revenue and ranks 129th on the Fortune 500 list of largest corporations in the United States. The A.M. Best Company has rated Liberty Mutual A (Excellent).

Along with being the leading provider of workers compensation insurance, programs and services in the United States for 65 years, Liberty Mutual provides a wide range of insurance products and services, including general liability; commercial auto and business property; group life and disability; private passenger auto and homeowners insurance, and individual life and annuities.

The company employs 35,000 people in more than 800 offices throughout the world.

"Overexertion injuries result from excessive lifting, pushing, pulling, carrying, or throwing of an object."
"Bodily reaction injuries are caused from bending, climbing and slipping or tripping without falling."

Contact:
Richard Angevine
Liberty Mutual
(978) 430-9312