Most Expensive Component on Claims
The most expensive Workers Comp claim component seems to be premium-based. This is one that surprises most people.
When I ask this question at presentations, the answer is usually the medical cost of the claim, or pharmaceuticals, or even settlements.
The most expensive part of a Workers Compensation claim is….poor adjusting decisions. If the Work Comp claim adjuster makes a mistake on the file, the insured/employer ends up paying for the result of that mistake through a higher E-Mod, resulting in higher premiums.
One of the most common mistakes we see is in the area of file reserving. Check back on the blogs where I mention Worst Case Scenario. Your Workers Comp premiums are calculated from the reserves on a file, better known as the total incurred. AS I HAVE SAID NUMEROUS TIMES IN THIS BLOG, WHAT YOU HAVE PAID ON A CLAIM HAS LITTLE OR NOTHING to do with the Workers Comp premium paid. It is the total incurred that matters. Please see my prior posts on total incurred.
In my years in insurance companies and TPA’s, the only employees that understood what goes into paying premiums at the most basic level was the Workers Comp claim department. However, no adjuster has an exact idea of what effect a file reserve or total incurred has on an employer.
The other area that we see most of the errors and higher cost is in how expedient the employer was in reporting an accident (lag time) and how quickly the adjuster made the appropriate contacts. Within 48 hours AFTER AN ACCIDENT HAPPENS, the Workers Comp claim has already established its final cost factors. Yes, in 48 hours the claim’s direction cannot be changed. There is a prior post of mine on that subject.
Next Up – My Company is in the Assigned Risk Pool, are we paying that much extra, and if we are, how do we get out of it ASAP?
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