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Automated Reserving Programs Work Better Than Claims Adjusters?

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Automated Reserving Programs For Workers Comp – Better Than An Adjuster?

I received this question on automated reserving in response to yesterday’s post.

Graphic of Ohio Automated Reserving Written In White Tiles
123RF

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.

Software Automated Reserving Laptop And Cellphone Graphic
StockUnlimited

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, still 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 individual 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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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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