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Automated Workers Compensation Reserves Concerns

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Automated Workers Compensation Reserves Area Of Concern

The Automated Workers Compensation reserves by carriers and TPA’s cause me much concern. Automated reserving is an area of Workers Compensation reserving with certain insurance carriers or TPA that causes me great concern.

Icons of Insurance Automated Workers Compensation Reserves
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I have actually been told more than once by a Workers Comp adjuster that the reserves (no matter how inaccurate) could not be changed as their computer system had set the reserves and they are 99% accurate. I have never seen anything involving insurance that was 99% accurate.

Automated reserving is basically fill-in-the-blanks adjusting. As everyone’s healing period varies greatly, there is no “one-size-fits-all” estimation of the files reserves. As each injured worker is very unique, so should be the reserves on the file. For instance, say that an employee fractures their arm and will be off work for quite some time. The only way that the reserves can properly be set is with the experience of the adjuster at how much it will cost during the lifetime of the file.

However, there are some reserving systems that do not even allow changes to the preset reserves unless a very important development occurs on the file. There are even some automated reserving systems that only allow for a supervisor to make changes after the adjuster has set the initial reserves – usually at 60 days into the file.

Picture Accountant and Client Automated Workers Compensation Reserves Area
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Automated reserves are not the same as an online adjuster’s reserve worksheet. The adjuster can input anything needed to properly estimate the file reserves with an online worksheet. Automated reserves ask very unspecific questions and then semi-magically come up with the reserves. If your company has online access to the claims files, you may be able to see the documentation on the reserving. If you have this type of access, the adjuster worksheets may answer quite a few questions.

I am not saying that all automated reserving programs are inaccurate. Unfortunately, I have not seen one that can forecast a person’s genetics. It may be a good idea to ask your adjuster if they use automated reserving software. If so, these reserves should be followed very closely.

There are two different software packages that will automatically set the reserves. Due to legal concerns, I will not mention them here. There is one monopolistic state that still uses this type of software to set reserves.

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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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