Insurance buyers see increasing value from reducing their total cost of risk across multiple lines of commercial insurance, according to a new survey commissioned by property and casualty insurer Wausau Insurance, Wausau, Wis.
The survey, “Wausau Multiline Productivity Poll,” indicated that 81 percent, up from 70 percent last year, of commercial insurance buyers save at least $1 in lost productivity expenses for every $1 saved by reducing workers compensation claim expenses. Three-fourths, up from 60 percent last year, of respondents said they 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.
“Insurance buyers are gaining a greater appreciation of indirect costs,” said Mark Fiebrink, Wausau’s president and chief operating officer. “Our benchmark data shows an upward trend of understanding of the total cost of risk among insurance buyers, and their agents and brokers play an important role.”
More than two-thirds of respondents said their agent or broker “always or usually” counsels them to consider the total cost of risk, in addition to the direct cost of premiums and deductibles, when considering property and casualty coverages, the survey indicated. Another 18 percent said their agent or broker “sometimes” counsels them to consider the total cost of risk.
Most survey respondents said they save at least $2 in lost productivity expenses for every $1 saved by reducing claim expenses for all four lines of coverage. For the second year in a row, respondents said they get somewhat higher lost productivity savings from workers compensation than from the other three lines of coverage, although the gap is narrowing.
Fiebrink said the survey findings for workers’ compensation 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. 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. The perception that there are greater productivity savings from workers compensation may underestimate the potential of other types of claims, and the new survey data indicates mid-sized employers are beginning to recognize that, Fiebrink said.
“We need to expand the focus beyond workers compensation,” Fiebrink 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 becomes more clearly understood.”
Among the other significant findings in the survey:
The Wausau Multiline Productivity Poll was an independent survey of 200 financial executives and was conducted by Boston-based market research firm Atlantic Research & Consulting. A similar sample of financial executives, from predominately mid-sized companies, was polled one year ago on many of the same questions. To view the entire survey results, visit http://www.wausau.com/ poll. The poll will be updated and revised annually.
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