Workers Compensation Reserves – The Ever-Silent Budget Killer
Workers Compensation reserves can be critical when trying to lower your company’s premiums.
The silent budget killer for most company’s Workers comp program revolves around the claim reserves.
I have posted very often about the process for calculating Workers Comp premiums. The one area that I could never cover enough is Workers Comp reserving. The reserves are the engine for all calculations that have to do with calculating your Experience Modification Factor, or E-mod.
What makes the reserves on a file so unique? In all the process of how your Workers Comp premiums are charged, the Reserves are the only unregulated numbers in the equation. The reserves on a Workers Comp file are left up completely to the claims department. The adjuster can set the file reserves at any level they wish. The only regulation the file has is the supervisory staff of the claims department.
How are reserves calculated? It is usually some form of an educated guess by the claims adjuster. You have very little control over the Workers Comp reserve figures.
Questioning the loss reserves on a file should be a quarterly, if not monthly task for you or someone in your organization. A well-placed email to the claims adjuster on the file. Do not just email the adjuster and say the reserves are excessive. Why are they excessive?
How do you take control of your reserves? A Workers Comp Loss Run review is a great way to make sure you are not overpaying on your Workers Comp premiums. One of my prior posts covers the review in detail.
If you feel that this is a very complicated process, you are very correct. Do not hesitate to call in a claims expert such as our company to help you make sure you are not overpaying.
Next Up- A Workers Comp Definition
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