Workers Comp Indemnity Reserves Are One Of Three Reserve Categories
The Workers Comp indemnity reserves on a claim represent the future payouts of benefits to the employee over the life of the claim.
The definitions for most of these terms can be found by clicking on the Definitions tab/button in the menu. I will not reiterate them here to keep the post at a readable length.
The indemnity part of claim reserves is basically the amount that is paid directly to an injured employee for:
- Wage loss – Temporary Total, Temporary Partial, Permanent Total
- Permanent reduction in function to a body part – Permanent Partial, Disfigurement
- Other – Many state-specific indemnity payments
Unlike the medical reserves, the indemnity reserves are more easily forecast. This is not to say that they are easy to predict for the lifetime of a claim. They are usually easier than the medical reserves to estimate.
One of the areas that can cause great unpredictability is if an injured employee is under consideration for a Permanent Total rating. If an adjuster has to consider the employee as being unable to return to work for the rest of his/her life the indemnity reserves can spike tremendously. If an employer can offer a return to work even with a different job function, this is very helpful to avoiding a huge reserve and may be very beneficial to the employee. Quite often, states will have “make-work” laws that prevent an employer from just making up a job for an employee to return to work. This is an area of very heavy litigation in certain states.
Using my Six Secrets/Keys to Cutting Workers Comp Costs will reduce the likelihood of extreme reserve increases and will benefit your employees. The Four Secrets tab will soon be Six Secrets. I will write a quick post after the other two are added to the list.
I may change this post as I write the ones for Medical and Expense Reserves. Check back on this post when you are reading the upcoming ones.
Article provided by James J Moore, AIC, MBA, ChFC, ARM. All articles are original content. Check out the full website at www.cutcompcosts.com.