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Allocated Expenses – Very Important and Confusing Definition


Allocated Expenses-Workers Comp Term of The Day

Allocated Expenses (also known as ALAE)  are expenses charged to a Workers Comp term file that are not indemnity or medical benefits. They are associated with the adjusting of the file. Expenses for defending claims such as attorney fees, private investigators, independent medical exams, and many others are considered as Allocated.

Picture of Wallet Allocated Expenses Full Of Money

There is a great deal of confusion on where to classify certain charges to the file such as rehabilitation nurses hired by the carrier and medical bill review charges. As there is no concrete standard, some allocated expenses are charged under medical expenses and vice-versa.

Allocated Expenses ARE NOT usually reported to the insurance Rating Bureaus as they are seen as the costs incurred by the carrier to adjust the claim.   Experience Modification Factors are not affected by this figure.

If the loss run ALAE figure seems large when compared to the Paid or Reserved figures, this should be questioned.  The individual charges should be reviewed.

2020 Update – California worker’s comp claims usually include a large amount of ALAE.  Some claims total to almost 90% of the medical or indemnity payouts.

The rehabilitation nurse charges were debated for years as a medical or ALAE.   The carrier’s claims manual addresses where to include the rehab nurse charges.

When I have attended the NCCI data conferences in West Palm Beach, the determination was made ALAE was any type of funds that were not incurred to assist the injured employee medically.

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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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