The High Cost of Randomness


The Workers’ Compensation industry negatively impacts for random events more severely than it rewards. A high-cost claim can completely invalidate all evidence that your workplace has a great safety culture or positive working environment. This Collective Thinking focuses on the value of being effective after the fact, as most high-cost claims are often random.

High levels of promotion in this industry focus on pro-active behaviours, whilst they remain important and can help with minor claims and incidents, the single most effective action that you can do is to avoid a claim becoming high cost (notice I said a claim becoming high cost, not avoiding a claim). Whilst we can see some claims coming, or even understand how they happen, some take us by surprise and are unpredictable. These often being the high-cost claim. So, what do I mean when I talk about high-cost claims, here are three common ones:

  • Random catastrophic event, either unforeseen or out of human control
  • Employee v Employee bullying/harassment/mental health claim
  • Workload Stressors or other incident of similar nature

Effective actions after a claim are lodged is the single most important factor to managing your high costs claims. A question you need to ask yourself and your business if you currently have high costs claims is “How well did we perform after the incident?”

All evidence suggests claims are increasing (particularly mental health) across Australia, effective management of a claim post incident is critical to the success of your business and managing costs. The impact of this outweighs any pro-active strategy or investment as the most high-cost claims come from unpredictable events and incidents and can result in a greater significant negative cost than the positive gain of the pro-active investment (often lasts longer too). So, if we cannot predict a high-cost claim, how can we prevent it happening? Answer is we cannot, we can only manage it.

Take stock of how your business has managed events of this nature in the past, learning through past mistakes is a great way to have you business ready to handle the next unforeseen event or incident.

Kain.