Claim duration

This factor is not statistically significant in Hunt and Habeck s (1993) multivariate regression, but the results are suggestive a 10 percent increase in this people-oriented culture variable is associated with a 4.2 percent reduction in lost workdays rate, as predicted by our model. This analysis focuses only on claim frequency, so the authors do not report any analysis of claim severity. Our results on claim frequency support the analyses of both Hunt and Habeck (1993) and Hunt et al. (1993), and suggest litde or no effect of involvement in decision making on claim duration. Their findings with respect to management culture variables (the focus of their study) will be discussed below. 

Following this procedure, we merge firm-level data from the survey to claimant-level data from Miimesota s workers compensation files at the Department of Labor and Industry. Since costs are the product of claim fi equency, claim duration, and benefits, we partition our statistical analysis into claim frequency and claim duration components to see whether the HRM practices affect claim fi equency, claim duration, or both. This will provide evidence about whether costs are reduced either because of loss prevention effects (in that a particular practice reduces the number of claims) or loss control effects (in that a particular practice limits the costs of those injuries that have occurred). We assume that the benefit parameters (maximum and minimum benefits) are exogenous relative to the choices made by the firms in our survey and do not model benefit determination here. 

As a result of our desire to partition HRM effects into their claim frequency and claim duration components, our descriptive sample statistics vary by t)q)e of analysis. These descriptive statistics are given in the empirical work in the next two chapters of the monograph, next to the corresponding analysis relevant to the descriptive statistics. 

The indirect effects of these programs may also be important. Anecdotal evidence suggests that injury claims tend to increase with announced reductions in workforce or as local unemployment rates rise. We estimate how layoffs affect claim duration by including a duimny variable indicating whetherthe firm has experienced any recent employment layoffs or cutbacks. In our models, we were also interested to see whether any of the corporate safety culture variables listed in the previous paragraph modify the layoff/claim-duration effect that is, whether there are interactions between HRM practices and downsizing. 

Aggregate data Table 3.2 revisited. While the most credible information on claim duration comes from the analysis of individual claim durations in Tables 3.3 and 3. 4, the middle and right columns in Table 3.2 provide some alternative estimates on how HRM policies affect claim duration. The middle column of Table 3. 2 corresponds most closely to the expected cost analysis given in Table 3. 6, below, but is not always consistent with those results increases in Employee Participation in Decision Making, Employee Participation in Financial Returns, and Management Safety Culture reduce expected losses, as they do in... 

We generally find statistically significant effects, of the expected sign, in the duration models. While we do not report the estimated shape parameters of the Weibull distribution in Tables 3.4 or 3.5, they indicate negative duration dependence as claim duration increases, the rate of exit from claimant status falls. Hence, the longer a claimant stays on a workers compensation claim, the less likely he is to leave it. 

HR practice Impact on claim frequency (%) Impact on claim duration (%) Overall impact on indemnity costs (%) Indemnity cost change per employee ( ) (per std. dev. change)... 

As an example, if a firm were to go from using two to using three financial returns programs (Employee Participation in Financial Returns went from 2 to 3), then claim frequency would fall by 23 percent and claim duration would fall by 13 percent. Lost work-time benefit eosts... 

EPDEG does appear to be associated with greater claim severity (the significant EPDEG coefficients in the center and right colunms). An increase in epdeg also is estimated to increase claim duration in the individual claimant analysis in Table 3.4, as we will show shortly. 

Claim duration may rise or faU, depending on whether the change in claim frequency substantially shifts the relative number of short- and long-duration claims. If this composition effect is small, we would expect the average claim duration to increase with downsizing as injury severity increases with injury risk. 

Reporting effects may also explain the empirical results on injury severity. In an effort to reduce the costs of purchasing WC firms should expand their efforts to reduce both the number and the severity of injuries as WC benefits rise. Nevertheless, with only one exception (Chelius 1983) the studies summarized in Table 2-2 show a positive relationship between WC benefits and injury severity. Chelius (1982) found higher levels of WC increased days lost per case, while Worrall and Butler (1985), Butler and Worrall (1985), Johnson and Ondrich (1990), Krueger (1990b), and Curington (1994) found that higher benefits raised claim duration. The results that WC seems to increase... 

Worrall, J.D. and Butler, R.J. (1985). "Benefits and Claim Duration," In J.D. Worrall and D. Appel, eds.. Workers Compensation Benefits Adequacy, Equity, and Efficiency, Ithaca, NY ILR Press, 57-70. 

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