REGULATORY CAPTURE AND EFFICACY IN WORKERS’ COMPENSATION

Steven P. Clark, David C. Marlett and Faith R. Neale

Journal of Risk & Insurance, 2018, vol. 85, issue 3, 663-694

Abstract: We examine changes in workers’ compensation laws from 2003 to 2011 and their effect on insurer performance as measured by loss ratios and claim costs. We study changes to: length of temporary total loss indemnity, penalties on employees who do not comply with rehabilitation efforts, employer or employee choice of physician, and limits on attorney fees. We find differential effects among these reforms with the most robust being changes to limits on temporary total indemnity and penalties for workers who do not comply with rehabilitation efforts. We measure one effect of the political environment and find that appointing authority over the workers’ compensation board or committee significantly affects loss costs. Lastly, we find evidence of regulatory capture in workers’ compensation.

Date: 2018
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