Aon does not approach the risk work accidents in a traditional manner. To this extent Aon developed its own methodology based on a "financial approach" of the risk work accidents.
Financial approach Work Accidents
The goal of this financial approach is to determine the exact cost of the risk work accidents through the calculation of the rate of return . The rate of return is based on the financial results of the last five years.
Based on the available data, Aon calculates the reserves for Medical Expenses and Temporary Work Disability conform the provisions applicable to the insurers of work accidents.
Aon also calculates the value of interest capital that needs to be anticipated for individuals with a permanent disability, based on the conversion rate included in the work accident legislation.
Based on this data a complete financial damage statistic is composed, based upon which the rate of return can be calculated.
This does not yet take into account the management costs (within the organization or at an insurance company), and this is why Aon further examines the calculation of the management cost.
Calculation of the management cost of Work Accidents
Based on the number of claims and the type of claims (frequency and gravity) it will be possible to determine approximately the number of individuals (as well as the profile of these individuals) necessary for managing work accidents, taking into account different insurance possibilities.
The estimation of the potential cost of the organization necessary for damage management is added to the risk work accidents and on this basis a determination is made regarding which insurance formula is most appropriate.