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Total Incurred – Two Very Different Definitions – NCCI vs Loss Runs


Total Incurred Means Two Different Things In Two Different Places

The Total Incurred part of claims reserves consists of the indemnity reserve added to medical reserves for reporting to the rate bureaus.  The figure does not include ALAE better known as an allocated expense.

Two Total Incurred illustration
Wikimedia Commons – Kelly Bailey

Distinguishing expenses from medical incurred is very critical.  The employer should not have ALAE included in their E-Mods.

Therefore, one cannot match the total incurred on the worker’s comp loss runs and on the UNISTAT reports for the rating bureaus.

I have posted on this term previously. It is the sum of the amount paid and the Workers Comp claim reserves. The figures are included in employers’ rating bureau reports. Total Incurred is the most critical part of an employer’s E-Mod.

The insurance carrier or TPA denotes the figure with somewhat differing terms.  I have seen it called Total Reserves and a few other terms.

The official definition – which is really the formula Reserves + Paid = Total Incurred. The sum of incurred medical and indemnity benefits and others for lost-time claims is also a definition.

Reserves consist of what the adjuster or claims staff considers the predicted amount that will be paid out over the life of the claim.  An efficient adjuster reviews their reserves at least every  60 days and when there is a major file development such as a surgery recommendation by the treating physician; a return to work; or final settlements all as examples.

The paid part of the above equation results in much more difficult reviews known as leakage audits.   Leakage audits require a consultant or employee with a heavy financial and adjusting background and usually seven years adjusting experience in their backgrounds.

Next time that you receive a loss run for your company, highlight the column that reads Total Incurred.

Related: FREE Workers Compensation Insurance Definitions with Glossary

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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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