Economic Effects of Workers' Compensation in the United States: Private Insurance and the Administration of Compensation Claims

Using a sample of workers' compensation claims from New York, this article investigates (1) the probability that the claimant and insurer will negotiate a settlement rather than adjudicate the claim; (2) the size of the settlement, if settlement occurs; (3) the size of the award if the claim is adjudicated; and (4) factors determining the extent of the insurers claim adjustment efforts. The findings show that insurer adjustment activities increase settlement probability and that a 24%-25% discount rate is required to equate lump sum settlements with the benefit stream paid by an adjudicated award.