Risk Management in Danish Workers' Compensation

Preventing Accidents Through Analytical Insight

December 2022

Accidents, which happen in relation to our work, have enormous economic and human consequences, for the individual as well as for society. All companies in Denmark are obliged to take out workers’ compensation insurance for their employees in order to ensure that an injured employee is guaranteed to receive an appropriate compensation. However,  an insurance cover is only important if an accident happens. Better yet is to invest in risk magagement and accident prevention – to the benefit of employers as well as employees.

Why is Risk Management Important?
The first, and arguably most important, benefit of proper risk management, is the human aspect. Preventing an accident makes sense irrespective of any economic incentives, even if it takes an initial investment. That said, there are often substantial economic benefits to investing in accident prevention, which over time can result in a very reasonable ROI.  

The following chart shows the total compensation and number of cases for two of the most important types of compensation: loss of earning ability (EET) and permanent injury (Mén). Note that the data is by year of decision, so the chart is heavily affected by the processing time at AES. The large increase in cases relating to loss of earning ability in 2017 is thus due to an extraordinary effort on the part of AES to finalize a large number of old cases. On average, compensations for work related accidents amounted to over 2.8 billion DKK across 2015 to 2021. 

Source: https://www.aes.dk/

Apart from the compensation itself, which employers pay for indirectly through the insurance premium, employers also incur indirect costs as a consequence of work related accidents. According to an article from 2017 by Arbejdstilsynet, the internal net cost associated with an accident resulting in more than 30 days of absence from work, is approximately DKK 58.000 on average.  The estimate includes salary during absence and cost of recruiting and training, but not other indirect costs, which are hard to measure, such as loss of productivity and negative effects on moral. 
Accident Prevention

As with any other complex problem, it is essential to approach accident prevention in a structured way. The first step is to figure out how and where to prioritize your efforts. This is an area in which analytics can be very helpful. Analytics allows you to gain insight into where accidents happen in the organization and how they happen. 

As an example, the following chart shows the distribution of accidents across common causes over time. Slips, trips and falls, overuse injuries and collisions with objects are the top three most common causes – and they are in an increasing trend. We will naturally never be able to prevent all accidents, in particular accidents resulting from inherent risks associated with a job: if a large part of a job is carrying heavy objects, overuse injuries are practically impossible to eliminate. On the contrary, slips and falls are very rarely the result of an inherent risk and can therefore be avoided to a large extent through training, improvements to the physical work environment and a reduction in stressful behaviour.

Source: https://www.aes.dk/

Note that the chart doesn’t say anything about the severity of the accidents, nor does it say anything about why there is a trend (in this case, it is, at least in part, due to changes in the law in 2020 which means that more accidents are now acknowledged). Uncovering the full picture requires extensive analytics which is tailored to the individual organisation.

The second step is of course to take action based on the insights from the first step. Implementing the preventive measures, and especially seeing the results, can take a lot of time. During this time, it is important to ensure that we are tracking the preventive measures by collecting relevant data points. Ideally, these data points are then fed to an analytical pipeline, which allows us to automatically and effortlessly keep track of the results of the preventive measures.

Risk management in Workers’ Compensation is something we are very passionate about at SVMAnalytics. If you would like to have a chat about how we can assist your organisation, whether that’s a private company or self-insured public entity, feel free to reach out at Martin.Svensson@svmanalytics.dk or +45 5211 5490.