Main Workers Comp Question At Presentations and Meetings
A great Workers Comp Question was asked by one of our blog readers. This is a question that we are asked quite often at presentations and client meetings.
What is the difference between paid, total incurred, and reserves on our Work Comp loss runs? The way that most carriers and TPAs define the terms are as follows:
- Paid – what was paid on the Workers Compensation file to the date of the loss run. If any large bill or payment was in a pending status, Paid does not include the bill until a check has been cut. THIS IS ONLY PART OF WHAT YOUR EMOD IS CALCULATED FROM YOUR UNIT STAT DATE.
- Total Incurred – This is what was paid + the Work Comp reserves on the file. THIS IS WHAT YOUR EMOD IS CALCULATED FROM YOUR UNIT STAT DATE. The Total Incurred on the file includes the reserves.
- Reserves – This is the estimated amount the Workers Comp adjuster thinks will be spent on the claim OVER AND ABOVE WHAT HAS BEEN PAID ON THE CLAIM.
- PAID + RESERVES = TOTAL INCURRED
Remember that Expenses are included as part of the Total Incurred figure on loss runs.
Rarely do the rating bureaus include ALAE (Allocated Adjustment Expenses) in their Experience Modification Factor calculations.
Check out our next installment – Some misconceptions about Emods and Loss Runs