Rousmaniere: Insuring Hazardous Jobs

What a difference a generation makes in dangers at work. Since the mid 1990s, the incidence of lost time injuries was cut in half. Yet dangerous jobs remain. What are they? 

If you look at fatality rates, the same ones appear year over year, such as logging. But fatalities are extremely rare today. What if we looked at danger in a way well known among workers’ compensation underwriters – jobs that are the highest cost to insure? For each state there will be a different calculus. We settled on Florida.

With about 8% of the nation’s population, the state matches the rest of the country in declining injury rates. The National Council for Compensation Insurance announced in January a 13.8% reduction, one of the steeper declines when virtually all states see the cost of insurance drop.

We looked at a detailed NCCI analysis submitted to Florida in 2018. We teased out about key high risk 20 class codes that meet two criteria. They met a minimum size of payroll exposure of $100 million, equivalent roughly to 2,500 workers. And they had premium rates of at least $7.50 per $100 in payroll. Florida’s insured costs in 2018 averaged about $1.81 per $100 in payroll.

By using these class codes we can include both fatal injuries (about 300 in total occur annually in Florida) and the cost of non-fatal injuries. The latter account for the overwhelming share of total workers’ compensation losses. For the entire state workforce, upwards of 20,000 workers each year incur an injury keeping them from work for at least a month.

To be sure, the insurance industry’s data on the economic burden of work hazards is a partial picture of the economic loss. A lot of the economic loss falls on the worker’s household. Still, insurance data is valuable. The data allows us to focus of several of the hundreds of class codes.  

These very few job categories account for a very small share, no more than 3% of the private and public workforce. But they account for one seventh of workers’ comp premiums. Their median class code rate is about $10 per $100 in payroll, contrasted to 23 cents for a clerical worker

The majority of these jobs are, not surprisingly, in construction. They include people who build homes, as well as specialists such as in boiler and electrical line installation. Managing work injury risk in construction is made all the more difficult by the large amount of subcontracting, often to small firms without safety professionals.

In addition, unauthorized workers take on some of the highest risk construction jobs, such as roofing. We don’t know how much of Florida’s rooking workforce is with very small firms and how many are unauthorized workers. The primary roofing class code, 5551, has a rate of $19.66 per $100 in payroll.

The largest job category among the 20 key categories in terms of total premium is commercial drivers (class code 7219). This type of worker is smack dab in the middle of major concerns about work safety and health in America today.

Some 40% of work fatalities are vehicle rated. But not all and perhaps for truck drivers not even most work injuries involving drivers arise during the course of driving. A truck is a warehouse that moves. A truck driver’s injury risk is in some degree similar to that of a warehouse worker, moving stuff.

There is a lot of driving beyond class code 7219. As my colleague Nancy Grover has written on a  recent report on vehicle-related injuries by the National Council on Compensation Insurance, driving-related job classifications comprise approximately 25% of workers’ compensation payroll and about 50% of workers’ compensation premium. Class code 7219 is one of more than 300 NCCI class codes that contain “drivers” in their description. Workers in the class code are just driving (plus loading and unloading) 100% of the day.

There is one thing about truck drivers in the 7219 code that preoccupies the best run trucking companies: the health condition of their workers.

A few years ago, researchers approached long haul truck drivers at truck stops throughout the country and conducted 1,670 in-depth interviews. Compared to the total adult working population, they found among truck drivers much higher rates of obesity (69% vs. 31%) and current smoking (51% vs. 19%).

Two-thirds of the respondents had two or more risk factors: hypertension, obesity, smoking, high cholesterol, no physical activity, or six or fewer hours of sleep per 24-hr period.

I asked Frank Pennachio, founder and director of Florida-based Oceanus Partners and a 30-year veteran in workers’ comp, how he looks at hazardous work. He told me, “An additional challenge with high risk jobs is the injuries tend to be less frequent, but more severe. It is exceedingly difficult to reduce low frequency, high severity events. There is much debate in the field regarding whether or not frequency leads to severity. Many will attest that with high risk jobs, the severity of an injury is not necessarily precluded by a series of frequent, relatively minor injuries.” 

I’d like to see more analysis of the relative handful of high-risk jobs that impact total insurance costs. They include roofers and truck drivers. I expect about 20 class codes in any state are worth analyzing in depth. By adding more transparency to these job categories, there will likely be more informed competition among insurers, more awareness among state regulators, and more interest among the public to further improve safety.

Gyana Singh will be a freshman at Grinnell College in the Fall of 2019.

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