Gallagher Bassett We Guide. We Guard. We Go Beyond.

The good folks at the Workers' Compensation Research Institute (WCRI) have just published their tenth annual Medical Price Index for Workers' Compensation (membership required). Excellent news—medical costs have been relatively tame in the 35 states covered by WCRI (encompassing 87% of all WC costs). Only six states had material changes in costs, year over year. The outliers were: Arizona, Illinois, Kentucky, Massachusetts, North Carolina, and Texas. All went up more than 10% except Illinois which went down well over 15%.

But before you break out the bubbly, a few notes of caution. First of all, the WCRI Index looks at median values. Fee schedules are complex animals and the actual cost of any given procedure may exceed the Waring Blender* number for that state. Secondly, for you multi-state employers, costs are still wildly variable from one jurisdiction to the next. Prices paid for a similar set of professional services varied significantly across states, ranging from 26% below the 35-state median in Florida to 158% above the 35-state median in Wisconsin in 2017. Wow. WCRI doesn't seem to have an explanation in this report for what the cheese-heads are up to.

The news on comp costs generally is looking good. The epidemic of opioid overprescribing is fading, although a substantial number of claimants who were "hooked" some time back are still on the claim rolls as we all struggle to figure how to help them lose the opioid monkey. The workplace continues to get safer. Claim frequencies are down. More and more states are rolling back comp premiums.

Excellent. Now you have more time to worry about all the new cyber risks we see popping out of the woodwork, as described below. A risk manager's work is never done.

(* For the millennials in the audience, the big band leader and engineer, Fred Waring, introduced the first successful electric kitchen blender in 1937. In statistics, a Waring Blender average is what you get when you dump a bunch of data in your Excel spreadsheet and hit AutoSum-Average.)

Got Power?

Meet Dragonfly and Energetic Bear. You don't want to know them, but you might make their acquaintance anyway. These are the code names for some of the Russian hackers who are specializing in penetrating our electric utilities, according to The Wall Street Journal. According to the Journal, these operatives have been startlingly successful in working their way into supposedly secure, "air-gapped" control rooms. According to a source at the Department of Homeland Security (DHS), the hackers have reached the point where they could throw switches and disrupt power flows. For real, not in theory.

As you may have read in these pages a couple of months ago, Russian hacklers did just that in Ukraine, in the middle of winter. The US power grid has a lot of problems. In many places it's old and creaky or just barely adequate to carry today's power demands, but these hack attacks pose a whole new type of threat that impinges directly on risk issues like business interruption. What do you do if Energetic Bear takes a swipe at your local utility and shuts it down for days, maybe weeks?

Do you have defense in depth, such as alternate power sources for critical operations? Do you have alternate locations (hot sites and cold sites) which can pick up the slack if production or services are crippled at one location? Do you have insurance in place to cover losses if a key part of your business is off-line and shut down while the power is out?

Ever since Edison, Tesla, General Electric, and Westinghouse made electric power an everyday part of our lives early in the last century, we've tended to take it for granted, barring the occasional storm. Even after something like Superstorm Sandy we expect the power to come back on in a few days, and we're generally ill-prepared if it doesn't. DHS is not quite certain what Energetic Bear and his playmates have in mind—pinpoint "gotcha" attacks or major systemic attacks that cripple large parts of the grid for months—but they seem to have been working hard for some time at laying the groundwork for something.

Your humble, ink-stained scribe has just installed a new 19 KW, state of the art generator. What should you be doing?

Just When You Thought It Was Safe...

For the last decade or so, long distance shipping has been getting safer. Ship losses are down 4% in just the last year (2017). Pirate activity has been suppressed (except for the waters off Columbia where it's on the uptick) and new ships with new navigation and handling systems continue to come on line. Major causes of loss remain bad weather and good old human error, both hardy perennials in the garden of loss prevention. But a new report, Allianz Global Corporate & Specialty's (AGCS) Safety & Shipping Review 2018, suggests that a change of wind may be in the offing. The report explains that new risk exposures for the shipping sector include:

To top it off, loss reports are now defining a new Bermuda Triangle. Nearly one third of shipping losses in 2017 (30) occurred in the South China, Indochina, Indonesia, and Philippines maritime region, up 25% annually, driven primarily by increasing shipping activity in congested Vietnamese waters.

Risk is a roller-coaster. As the Allianz report indicates, favorable trends don't last forever and trans-ocean shipping may be an area of risk where the parameters are about to change. An old-timer in California agricultural risk once told me, "claims are like grapes; they come in bunches." View all declining risk trends with sophisticated suspicion. There may be a new Bermuda Triangle taking shape even now.

A Straw in the Wind? 

A recent development in New York City bears watching. The city has long had a provision that allows employees in what are called "physically taxing" jobs to retire at age 50 after 25 years. For the most part this applies to first responders and some maintenance jobs involving heavy materials and big tools. A recent court decision, however, has extended this provision to nurses in city-operated hospitals. Nurses, of course, spend 90 to 95% of their time on their feet in many assignments. Workers' comp claims for nurses typically begin ratcheting up after about age 50.

Most types of businesses have their share of physically taxing jobs and, while the political issues at play in NYC may not apply in your business model, human nature does. Bear in mind that the US has a still growing obesity problem, an aging workforce, and life expectancy for Americans has actually started to go down. Perhaps the practice of keeping people in these physically taxing jobs much beyond 50 needs rethinking. Nursing provides a useful example. Some large medical centers now use redesigned career ladders which move floor nurses into more sedentary jobs such as triage and file review as they age, reducing lower body strains and stresses. This can reduce comp claims and the costs of early retirement while effectively harvesting the expertise of veteran nurses who've seen everything and are surprised at nothing.

Could redesigning long established career ladders work in your business? Are current practices pushing people into early retirement unnecessarily - and running up comp costs? You might want to give this some thought. Your people keep getting older. Try working with that fact rather than against it.