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Workers’ compensation risk

Modeling workers’ compensation lines can be complex for insurers due to limited scope of coverage, which applies only when employees are on the job. The diversity in employee roles and varying shift schedules add more layers of complexity. Additionally, the modern workforce is highly mobile, with many employees working outside of their primary workplace. Leveraging our extensive expertise in risk modeling, Moody’s has developed a tailored solution to help navigate workers’ compensation’s specific challenges, providing insurers with deep insights and risk assessments.

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Capabilities

01 Enhanced exposure estimates

Enhanced exposure estimates

Exposure in our workers' compensation models is represented by number of people, which can be entered manually or leveraged through an algorithm that looks at average wage by occupation and ZIP code to convert payroll to number of employees for any location in the United States.

02 Human vulnerability model

Human vulnerability model

Our workers’ compensation models use the hazard from the core models but leverage a vulnerability module appropriate for human exposure. The human vulnerability model considers factors such as building construction and height to provide casualty rates for each of the six injury classifications defined by the National Council on Compensation Insurance (NCCI): medical only, temporary total, permanent partial minor, permanent partial major, permanent total, and fatal.

03 Cost severities

Cost severities

Losses can be determined by applying Moody's annually updated cost severities methodology to calculate the average cost expected given a particular NCCI injury state. These losses are broken up into medical and indemnity components to reflect the common structure of workers' compensation policies. For the United States only, cost severities are available by state, including all 50 states plus Washington, DC. For other countries, cost severities are available at the country level only.

04 Geographic coverage

Geographic coverage

Our workers' compensation models are built into our earthquake and terrorism models. However, users can access the human exposure accumulation tools in any region with a modeled peril regardless of whether there is a workers’ compensation model available in their region.

As our terrorism models offer deterministic scenario testing worldwide, the same can be said of the associated workers' compensation models. Probabilistic terrorism workers' compensation models are only available in the United States and certain cities in Belgium, Canada, Denmark, France, Ireland, Italy, Türkiye, and the United Kingdom. The probabilistic earthquake workers' compensation model is available in China, Japan, Taiwan, and the United States. 

News and views

blog

Sep 06, 2019

 Moody's
Shaking up workers’ compensation

We ask the question: Are (re)insurers sufficiently capitalized to withstand a major earthquake in a metropolitan area during peak hours? This question is especially relevant in California, an area prone to earthquakes where 20% of the United States’ total workers’ compensation market is concentrated.

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blog

Mar 27, 2018

 Moody's
California earthquake: Big risk, big exposure

California’s Workers’ Compensation Insurance Rating Bureau asked Moody’s to help it measure the cost of providing workers’ compensation benefits and provide insight into the types of earthquake events that could impact California and at what frequency.

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