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How and When Are Reserves Set For Each Claim?


Workers Comp Claims Reserves Set At 60 Days

When are indemnity, medical, and expense reserves set on your claims?  This subject is one of the most confusing and frustrating budget areas for insureds. Workers Comp reserves are very important to companies with a regular commercial insurance policy or self-insured. Quite often, I hear self-insureds say that reserves are not as important as they are “out of the Workers Compensation system.” Nothing could be further from the truth. I will cover this subject in a post later this week.

Insurance benefits Icons Claims Reserves Set In Blue Color

How do insurance company adjusters set reserves on a Workers Compensation file? It is an educated guess at best. Trying to estimate the lifetime payouts on a claim is very difficult, if not impossible. The healing period from an injury varies from person to person greatly.

The reserving is broken down into indemnity, medical, and expenses. The claims adjuster will almost always have online access to a reserving sheet. These sheets are usually not shared with the employers. In fact, in the next post, I will go over the major variables in the indemnity, medical, and expense reserves. Going over that now will make too long of a post to read.

An adjuster’s experience level will usually aid them with making accurate reserve estimates. The adjuster’s caseload will determine if they have enough time to calculate exact reserves. Always ask your adjuster for their background and caseload the first time that you talk to them. Adjusters have an authority level to reserve files as they see fit. If the file reserves exceed the authority level, the supervisor must approve the reserves.

Picture Of Medical Reserves Set Stethoscope

The most inaccurate reserving that I have seen is when an automated reserve is set by some type of software. As I said before, each person heals differently, so an automated reserve is never accurate unless the adjuster can override the system reserves.

I will cover the variables in each reserve in the next post.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management 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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