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2Compensation Claims

COMPENSATION CLAIMS

Compensation Claims

There is no denying the fact that an increase in compensation claim will create a knock-on-effect on various markets attributes notably the insurance market. Evidently, increased compensation cultures affect all spheres of humans, some good, some arguably not. The increased legal activity could raise the profile of the traditional legal cost that could significantly augment its entrance in the existing market. An increase in compensation claims would mean that a large number of individuals will need to be compensated by insurance firms in the event that a court rules in their favor. This in turn, results to increase spending by the insurance companies. As such, this retrospect paper attempts to draw the impact of such increase.

Evidently, the increased compensation claim would result to an increased cost in the insurance industry amounting from compensation payments and the subsequently increased cost in the society with respect to higher insurance costs (Patton 2015). Evidently, subsequent effects will be realized on healthcare cost. Studies showcase that a 10 percent increase in health care insurance reduces the chances of employment by about 1.7 percent (National Bureau of Economic Research 2016). Additionally, it reduces working hours by about 1 percent since the employers respond to the increased health costs by shifting full time jobs to part time jobs; where most do not consolidate health care benefits (National Bureau of Economic Research 2016). The increased healthcare cost will nevertheless reduce the number of population that accesses the healthcare service. As such, when an increased amount of income is realized in paying the healthcare insurance cost, then the population will have less to spend and less disposable income (Parton 2015). Such an effect can be represented in the curve below;

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Conclusively, the increased compensation claims will see an increased loss in many insurance companies. In response therefore, there will be an increased premium rates to compensate for the cost incurred in settling the payment. An increased cost will however increase the cost spent on the healthcare, where in some cases most if not all of the lower class citizens cannot afford such care. The insurance firms have to reclaim the money spent in compensation other victims. In effect, a reduced disposable income will be realized since a majority of their incomes will be spent on healthcare. In most case the disposable incomes will be channeled in payment of the insurance premiums. It is evident that an increased amount of compensation claims has a tremendous effect in the market.

Reference List

National Bureau of Economic Research 2016, Effects of Rising Health Insurance Premiums.

http://www.nber.org/digest/aug05/w11063.html. [1 May 2016].

Patton, M 2015, ‘U.S. Health Care Costs Rise Faster Than Inflation’, Forbes Magazine. Available from: http://www.forbes.com/sites/mikepatton/2015/06/29/u-s-health-care-costs-rise-faster-than-inflation/#71becdd76ad2 . [1 May 2016].

Patton M Health Insurance Premiums Are Rising Faster Than Income’, Forbes Magazine. Available from: http://www.forbes.com/sites/mikepatton/2015/06/30/health-insurance-premiums-are-rising-faster-than-income/#23f35af411eb . [1 May 2016].