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Self Insured File Reserve Reviews Important Part of Budget Process

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Self Insured File Reserves Need To Be Monitored

Reserve reviews for Self insured Files are just as important as ones for companies in the regular voluntary insurance marketplace. We often hear from Self Insureds that the reserves on a file do not matter that much, as it is paid funds that matter. Reserves are actually as much as or more important than with non-Self Insureds.

Vector Graphic of Files Self-Insured File Reserve Reviews
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The basic Workers Comp equation is Paid + Reserves = Total Incurred. As I mentioned in a recent post, it is very difficult to question what has been paid on a file. The reserves are the funds that are forecasted to be spent over the rest of the lifetime of a file. They are opinions.

As I have mentioned often in this blog, the adjuster, who is considered the Workers Comp expert on file, is spending self insured money directly out of your company’s budget. Why are the reserves important? They are usually what is forecasted to be spent and your budget must accurately reflect these forecasts.

The reserves are usually based on a somewhat sound principle by the claims staff. The reserves will feed into your Loss Development factors or LDF’s. LDF’s are really what you should budget in company funds over the next 10 years to pay the Workers Comp claims. Reserves are a road map to the expenditures for your Workers Comp claims.

Color coded Self-Insured Filing System Folders
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For instance, if you have a file that has $15,000 paid in medical, but there is a medical reserve of an extra $100,000 to be paid there is likely a huge medical bill that the adjuster is expecting to pay. When you are examining a loss run and looking just at the paid amounts, you may think the file is rather inexpensive…and then the adjuster pays a $95,000 bill. What looked like a smaller file now balloons into a much larger file overnight. ($15,000 vs. $110,000).

The reserves are an insight to how your Workers Comp budget is going to be spent. Look at the reserve figures and make sure to contact your claims adjuster(s) if you notice something odd about the reserves. How do you know if the reserves are odd or foretell of an important event on the file? That is very difficult to do in most cases. AS I SAID EARLIER, RESERVES ARE AN OPINION.

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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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