Automated Reserving Programs For Workers Comp – Better Than An Adjuster?
I received this question on automated reserving in response to yesterday’s post.
You had said there are no guidelines for a Workers Compensation Adjuster to set the Workers Comp reserves on a file – How about the automated reserving programs that are available? Do they work, and are they accurate?
Answer – I have seen some of them, and audited files, where automated reserves are set. They are no more accurate than the adjuster setting file reserves on their own. A great example is when we audited files for an Ohio client. Ohio is monopolistic. At the time, they were using an automated reserve system.
The reserves/Total Incurred for the files were not that accurate. One of the reasons is the adjuster needs to update what is going on in the claim just as if the carrier was non-automated on reserves. The bottom line is the employer was still paying the same premium regardless. The reason? – There are over 130 variables that go into a Workers Compensation reserve.
The software is only taking what it is given, so the reserves are only as accurate as what the adjuster inputs into them. BTW, the BWC of Ohio (Government-ran monopolistic Workers Comp Carrier) is and has been under investigation. What was one of the complaints? -inaccurate file reserves.
Update 6/24/2017 Believe it or not, I wrote this article almost 10 years ago. Today, no automated reserving programs exist that predict the reserves of a Workers Compensation file. My take on it – the human body heals differently for each person. Thousands of variables must be taken into account when the human body heals. I will update this article when I observe any accurate automated reserving programs.
07/25/2018 – Reserving analytics have still not yet arrived on the workers compensation scene. I have sampled two and the reserving algorithms have improved, but still cannot outperform an adjuster at workers comp reserving.
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