A Small Workers Comp Claim Is Still Expensive
The term small workers comp claim is such a nefarious item. I have heard that term often over the past 27 years. The term should be a smaller part of the risk of a larger loss.
There are two ways that Workers Comp reserves have an effect on your Experience Mod (E-Mod, Mod, X-Mod).
The first $15,000 of the Total Incurred on each claim (reserves + paid) is called the Primary Loss. This is a very expensive part of a Workers Comp claim. Due to the way the Workers Comp system has been structured, there is no such thing as a small claim.
The original thought was that employers with many small claims are more likely to have more large claims out of the many small claims. This was actually a great way to structure the E-Mod calculation. There is a penalty that was never really assessed properly which may be an unfair part of the E-Mod process.
For example, if an adjuster sets a reserve on a small claim at $30,000. The two parts of the loss would be:
- $15,000 Primary Loss
- $15,000 Excess Loss
Looking at the numbers, you might think that your company will pay the same amount of premium for the first $15,000 as for the next $15,000 of the claim.
Check out my next post to see how the Primary Loss (less than $15,000) can cost your company up to 500% more than the Excess part of the loss.
Update – we had to change the values in this post as the Primary Loss portion for most states is now $15,000. The same concept applies – just different numbers that represent a small workers comp claim comparison.
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