Workers’ Compensation Deductibles and Employers’ Costs

The profitability of workers’ compensation insurance has improved dramatically over the past few years. At the same time the use of large insurance deductibles has been on the rise across the country. This is one of the first studies to empirically test whether deductibles are associated with changes in employer workers’ compensation costs, and hence, may be responsible for at least some of the improvement seen in the area of workers’ compensation. The authors’ findings strongly suggest that the selection of a workers’ compensation insurance policy with a large deductible had an immediate impact on reducing the cost of high-dollar indemnity claims and a delayed effect on reducing workers’ compensation claim rates.