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.

Alan B. Krueger, John F. Burton, Jr., The Employers' Costs of Workers' Compensation Insurance: Magnitudes, Determinants, and Public Policy, The Review of Economics and Statistics, Vol. 72, No. 2 (May, 1990), pp. 228-240