Loss Reserves Are An Adjuster’s Forecast
Loss reserves are the the dollar amount set aside or reserved to completely cover the expected cost of a claim or claims under the workers comp policy issued by the insurance company.
This determined amount is set aside as of the annual statement date.Loss reserves become a factor in computation of premium.
These loss reserves – sometimes referred to as reserves – should be monitored to ensure no over reserving or under reserving has been done. The term causes much confusion with Total Incurred. The Total Incurred figure equals the Paid plus loss reserves
The Formula is:
Reserves + Paid = Total Incurred
The figure can be negotiated with the carrier at certain points in the life of the claim. Workers Comp adjusters pay attention mainly to the reserves. They do not want to over-reserve the file or run out of reserves.
Stairstepping happens when the claims adjuster increases the loss reserves just enough to cover medical bill payments or a few weeks of indemnity benefits. Having inaccurate and artificially low reserves through staristeepping should be considered dangerous for an employer’s workers’ compensation program.
Loss runs contain all of these very critical figures. Your company should ask for the loss runs monthly at least. Online access to loss runs makes the process much easier. You can usually run your own ad hoc loss runs at will with online access.
Online access may cost more, but it is worth every penny if your company is going to track your losses and premiums more closely.
Related: What Does Stair Step Reserving Mean?
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