Workers Comp Reserve Reviews Can Be Complicated
Reserve Reviews – the hidden way to save $ on your Workers Comp premiums – Reserve reviews are not something that most of our competition cares to address. However, reserve reviews are just as important as premium reviews. Once again, we try to use the word review and not an audit – see the previous blog.
Premiums reviews “look-back” three years into the past. Reserve reviews are the “here and now” part of your Workers Compensation premium. It is virtually impossible to go back in time and try to negotiate reserves. What you have on the file today is what counts.
Workers Comp file reserves are the engine of the E-Mod process. Reserves are not only what is spent out on a Workers Compensation file, but what the adjuster thinks will be spent out on the claim over its lifetime. Please remember, the funds that are paid on an open file to date have little to do with the reserves on the Work Comp file. You are charged THREE TIMES over three years for the reserve figure on the file. Not reviewing your reserves is like putting cash in the shredder.
Reserves run a totally different cycle from premium reviews and your E-Mod. For instance, to figure your E-Mod for 1/1/08, the reserves are used as they were on your Unit Stat date which should be 6/30/07. Here is a very important point. Whatever the reserves are on 6/30/07 at 5PM is usually what your E-Mod is figured from for your 1/1/08 policy date.
If you/we happen to find that a Workers’ Comp file is over-reserved on 7/11/07, that is just the way the ball bounces. What I am getting at is that you should start your reserve review program as soon as your new policy goes into effect.
For a 1/1/08 policy, the reserve review needs to start at least by 3/1/07. It takes a few weeks to begin studying, negotiating and tracking your reserves. Your reserves need to be tracked up to and including 6/30/07.
This is a different cycle than the Work Comp premium reviews – see previous note. The Bottom Line is that you must start very early to get your reserves in line. If you feel that you are in over your head, call a reserve review specialist such as our company. Do not just write checks.
Next Up – What is the secret question to ask anyone that deals with your Workers Comp to see if they understand the whole Work Comp picture?
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