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Home » Archives for October 2010

Archives for October 2010

Is Cleaners Asthma a Legitimate Disease?

October 29, 2010 By JL Risk Management Consultants

Cleaners Asthma – Term Of The Day

Cleaners Asthma raised many questions about the use of cleaning fluids in the workplace.   A newly recognized work-related injury or disease that has recently been studied. Workers who have been exposed to chlorine agents or bleach, have been found to have respiratory problems. The study included 13 cleaning employees – all found to have work-related asthma like symptoms.

Cycle Chart Of Cleaners Asthma Causes

Wikimedia Commons – 7mike5000

©J&L Risk Management Inc Copyright Notice

Filed Under: Cleaners Asthma Tagged With: chlorine, disease, symptoms

Is Accident Year Data A Good Basic Statistic?

October 28, 2010 By JL Risk Management Consultants

Accident Year Data – Workers Comp Term

Accident year data is often used for statistical comparison analysis. Most of the time when I have Accident Year Data, the information involves:

  • The inclusion of all carrier loss and exposure data (or that of a group of carriers or within a book of business)
  • Had taken place (regardless of when the losses are reported)
  • During a given 12-month period of time as all premium earned,
  • With no regard as to when the premium was written, during the same period of time.

    Graph Of Accident Year Data Basis

    Wikipedia – Mikael Häggström

I like to refer to this type of data as snapshot data as an employer can hone it on a variable or a given period of time and analyze it very heavily.  One has to be very careful of just examining one year of accident data.   Actuaries  and statisticians call this the naive approach to data analysis.  

We always recommend using the last five years of data at a minimum if you have that information available.   There are many sources to compile this data.  The use of Excel or Quickbooks  is a great method to analyze the data.  

©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: inclusions, snapshot

Does Workers Comp Subrogation Exist- Is it Worth Pursuing?

October 27, 2010 By JL Risk Management Consultants

 Workers Comp Subrogation Can Be Money Left On The Table

Does Workers Comp subrogation exist in Workers Comp claim department?  Subrogation is one of those under- the-radar terms in Workers Compensation.  

Picture Of Hand With Wallet Subrogation Exist Showing Money

StockUnlimited

It is the  act of recovering the amount paid for a loss by an insurer from the entity that is legally responsible. Subrogation is either granted by the terms of the policy itself or by law.

Also abbreviated to subro, it allows carriers to recover losses in the case of a second party’s liability in the claim. Subrogation reduces the amount of the loss for the carrier and the insured and can therefore reduce the insured’s insurance liability.

Update  – I have been reviewing a large number of claims files over the last few months.   The main weakness I have found is the investigation and notifying the responsible third party of a pending Workers Compensation claim and the payouts. 

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Filed Under: subrogation Tagged With: insurance liability, payouts

Workers Compensation – Is It Becoming The Forgotten Insurance?

October 26, 2010 By JL Risk Management Consultants

Workers Compensation – A Forgotten Insurance

Is Workers compensation becoming the forgotten insurance?  The talk of the town has, is now, and will be health insurance. I expect the health insurance discussion to continue for many months into the future. My concern is that employers of all types will even more view Workers Compensation as just a cost of doing business. Who can blame an employer with all the new health regulation changes? 

I have posted many cost reduction strategies in the blog. The one strategy that almost always pays 

dividends in Workers Compensation is when an employer begins to analyze their Workers Comp premiums.  The next step is the employer begins to question why they are writing premiums checks for a certain amount.

Graphic Of Piggy Bank Forgotten Insurance With Stethoscope And Injection

StockUnlimited

Even with the extra burden of the health insurance changes, being vigilant presently on Workers Comp will lower costs well into the future. Please remember what happens today with Workers Comp can affect your premiums for up to five years under the current E-Mod system.

Even thought the darling of the media is health insurance, paying attention to Workers Compensation is a guaranteed money saver.   The forgotten insurance can be devastating to a company’s bottom line. 

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Filed Under: Workers Compensation Forgotten Tagged With: health regulation, money saver

Are Policy Provisions Important?

October 26, 2010 By JL Risk Management Consultants

Policy Provisions – When Reality Hits

The Policy Provisions trip up employers when filing claims.  Even adjusters sometime have trouble with the policy terms.  The section of an insurance policy that defines the requirements of both the carrier and the insured. This section includes information about loss reporting and settlement, subrogation rights, and cancellation and renewal policies. This information can be found on the coverage form or declarations page of your policy and should be reviewed carefully.

Picture Of Woman Writing On Paper Policy Provisions On Table

StockUnlimited

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Filed Under: Definition Tagged With: declarations, filing claims

Your Workers Comp Policy – Read It From Back To Front

October 25, 2010 By JL Risk Management Consultants

Your Workers Comp Policy – A Different Approach

Read  your Workers Comp Policy the opposite way.  One of the areas of Workers Comp policies where most of our clients seem to run into problems is the rules and conditions that are in the policy, but not in the Declarations Page. When one of our client sends us their policy, we always read it back to front. The front is the obvious part.

Vector Graphic Of Gavel and books Workers Comp Policy On Table

123RF

A Workers Comp policy has many rules and regulations that heavily affect areas such as disputing an audit, cancellation, and many other parts just as important as what is in the first few pages. The advice we usually give is to read the policy from back to front, in other words – read the fine print.

Another helpful piece of advice is that not all policies read the same. Each time you switch Workers Comp insurers, the polices can differ greatly after the first few pages. There are state rules that govern the policies. However, the states do not dictate how each policy is to be written in each and every case.

As noted by NCCI(R), Workers Compensation is becoming more expensive per unit of coverage. Knowing what is in your policy is another great cost saver. If you have questions about your policy, email your agent and ask them and/or Google(R) the term.

Reading the policy from back to front may take about an hour. It is an hour well spent.

©J&L Risk Management Inc Copyright Notice

Filed Under: workers comp policy Tagged With: Declarations Page, regulations, rules

Voluntary Market Best For Employers Workers Compensation Policies

October 25, 2010 By JL Risk Management Consultants

Voluntary Market Very Critical To Workers Compensation 

A voluntary market compares to free market version of workers compensation insurance.   Most states set the Advisory Loss Costs.  Carriers deviate from the Loss Cost rates by filing loss cost multipliers (LCM)

Picture of Hands Using Calculator Voluntary Market Concept

StockUnlimited

A group of insurers  in a competitive environment who underwrite coverage to insureds based on risk or market dynamics. Usually, employers with low risk (E-Mod) will be placed in the voluntary market. Employers that are more risky may still be placed in this type of market, but it may be very expensive coverage.

The Workers Compensation market itself may dictate whether a voluntary market for a certain business segment exists or not. Having a low E-Mod is not guarantee that an employer will be placed into the market.

If an employer cannot be placed in the voluntary market, they will have to turn to the assigned risk markets for coverage or to some type of alternative insurance plan such as a Captive.  

States with  assigned risk pools provide a much more expensive coverage if the insureds cannot find coverage elsewhere.   The drawback consists of up to a 400% increase over market rates.   

The reason for the massive increase in rates is the assigned risk pool is the “last change saloon” for employers that cannot find coverage in the voluntary marketplace. 

©J&L Risk Management Inc Copyright Notice

Filed Under: voluntary market Tagged With: assigned risk pools, dynamics

Montana Has Highest Workers Comp Rates In The US

October 22, 2010 By JL Risk Management Consultants

Montana Has Highest Workers Comp Rates Now

Montana has the highest workers comp rates.  According to an Oregon-based report as covered by the Watchdog,  Montana is the nation’s highest for Workers Comp Costs.

Picture Of Hand Pointing Workers Comp Rates Salary Increase

StockUnlimited

The Treasure State recently produced an RFP for a review of their Workers Comp system. According to the RFP, an outside audit has never been performed for its Workers Comp system. We were going to bid on the RFP, but it was too ambiguous for us to provide a bid.   J&L does not bid on ambiguous RFP’s.  You may end up contracting for something that was not expected at the beginning of the process.  The state is not alone when producing ambiguous reviews for WC reviews. 

The other four states that topped the list were Alaska, Illinois, Oklahoma and California. The one that surprised me out of this list was Oklahoma. Oklahoma had basically used Compsource as the state fund, then privatized it on 1/1/10.   

One has to remember in these studies that only certain variables are examined.   The title of the study should read “Out Of The Variables We Examined”.

I will research the study and each state in turn to see what caused the higher costs for Montana.

©J&L Risk Management Inc Copyright Notice

Filed Under: Montana Tagged With: Alaska, Oklahoma, system, watchdog

Prohibited Risk Employers And Assigned Risk Programs

October 22, 2010 By JL Risk Management Consultants

Term Of The Day – Prohibited Risk

A Prohibited risk is any class of business that has been excluded by the underwriters of an insurance carrier. These classes of businesses will not be insured under any circumstance. This is also known as uninsurable risk.

Workers Compensation insurers avoid certain markets resulting in groups of uninsurable risks.  The state assigned risk pools prevent a business from being completely uninsurable.  The tradeoff is exorbitant rates.

Picture Of Signage Of Prohibited Risk Cell Phone

Wikipedia – WhisperToMe

 

©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: uninsurable, Workers Comp Insurer

Preferred Risk Will Usually Have Lower Premiums

October 21, 2010 By JL Risk Management Consultants

Term Of The Day – Preferred Risk

Preferred risk is any risk that is considered to be a better risk. These risks have a lower expectation of incurring loss and if losses are incurred, they will be less significant. For example, a business who has a effective safety program in place can usually get a reduced rate because the chance of accidents occurring are far less.

Picture Of Two Man Preferred Risk To Better Risk

StockUnlimited

The premium reduction for the preferred risk results from their E-Mod or Loss Development Factor. 

©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: incurring loss, preferred risk

What is A Net Loss In Workers Compensation?

October 20, 2010 By JL Risk Management Consultants

Net Loss Is The Final Countdown

The term Net Loss is seldom used in Workers Compensation. The figure  represents the final paid loss regardless of the reserves that were set on the claim.   The final paid loss may differ from the Total Incurred if the file was closed after the Unit Stat Date. 

 

Picture Of Man Hands Presenting Net Loss Arrow Decrease With Percentage

StockUnlimited

The net loss would be reduced if there are subrogation, reinsurance, or Second Injury Fund recoveries. The best term to use with Workers Compensation is Total Incurred as it represents the numbers that will be part of the Experience Mod calculation.

©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: injury fund, paid loss

NCCI Says Workers Comp Costs Up, Number of Claims Down

October 19, 2010 By JL Risk Management Consultants

NCCI Says Workers Comp Costs Up – Number of Claims Decreasing 

The NCCI  says claims costs are  increasing  but the number of workers comp claims is decreasing .   According to a very recent report by NCCI(R), the downward trend in the number of Workers Compensation claims has continued for 2009. The disappointing factor for cost cutters is that the actual costs per claim has increased. NCCI always does a great job in analyzing data and drawing various conclusions.

Picture Of Woman Holding Sack of Money NCCI Workers Comp Costs Thumbs Up

StockUnlimited

 My take on the numbers being down with costs increasing are threefold:

  • The more complex claims are now prevalent. Companies are shrinking. The number of newer and smaller claims compared to the complex claims is decreasing as the same injury rate applied to a smaller group means less claims.
  • Many studies have shown that any worker out of work six months will not return back to work. Companies may not have the same job available on a return to work. This would push the TTD period beyond six months much more easily resulting in more complex claims.
  • There is a self-induced pressure on employees to keep working and not file a claim. This is the basic fear of job loss. I have not seen any studies, but I am sure there is a small “bump up” in claims if and when the economy comes out of a recession due to employees having a lower fear of a job loss if they do report a claim.
  • The number of claims decreasing should not be a surprise during or just after  a recession.  With the number of workers decreasing, the numbers of claims would naturally decrease.  The employers’ risk portfolios are smaller due to less workers.   

If anyone has more to add or disagrees, please post a reply or send me an email.

©J&L Risk Management Inc Copyright Notice

Filed Under: NCCI Tagged With: analyzing data, recession

Did A Loss Constant Cause Me To Pay Higher Premiums?

October 19, 2010 By JL Risk Management Consultants

Term Of The Day – Loss Constant

Picture Of Old Man Loss Constant Small Business Guitar

StockUnlimited

In workers comp, loss constant is a flat amount added to the premiums of smaller businesses.The purpose of adding it in is to offset any unusual or more than average losses or claims. The smaller business can have a higher loss ratio. The Loss Constant offsets the risk of insuring very small businesses.

 

If you are a small business, then you probably did pay  more if you are in a state that allows them.. 

©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: loss constant, ratio

Does A Hazard Increase Work Comp Premiums?

October 18, 2010 By JL Risk Management Consultants

Hazards Increase Work Comp Premiums

Common Hazard Increase protection

Wikimedia Commons – Muffet

 Most hazards cause workers comp premiums to increase eventually.  Any condition that increases the chance that there will be a loss. Hazard exist in every workplace. Examples could be improper storage of office supplies which contain chemicals, or a slippery floor in a kitchen. Recognizing hazards and correcting them will provide a safer workplace, less risk, and ultimately lower premiums.

Employers with safety hazards in the workplace are penalized by the rating system through E-Mods and Schedule Rating Factors.  Many carriers will not insure an employer that allows preventable safety hazards.  

©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: Schedule Rating Factor, workplace

10 Workers Comp Year End Strategies to Cut Comp Costs

October 17, 2010 By JL Risk Management Consultants

Workers Comp Year End Strategies to Cut Comp Costs

These are the Workers Comp year end  strategies if your company’s Workers Comp policies renew on January 1, there are at least 10 strategies to implement to cut your costs. The first five are

  1. Your E-Mod is already set in stone with very few exceptions. The E-Mod was pegged many weeks ago. A reserve review is a waste of time at this point. Search for my posts on Unit Stat Date.

    Picture Of Woman Hand Presenting Year Strategies Icon On Transparent Board

    StockUnlimited

  2. There are many options to a regular Workers Comp policy. Organizations of any size have many choices such as PEO’s, self insurance, self insurance pools, small or large deductibles to name just a few. I have posted on this often.
  3. The Workers Comp premium auditor will audit your policy from 1/15/11 to 3/1/11. Make sure that your records are in order, especially if your company uses sub-contractors.
  4. Talk with your agent about extending your policy renewal date for one month or more. Agents drown from 12/15 to 12/31 of each year. Your company will get much better service by not having a 1/1 renewal date.
  5. If your company is going to work in other states, make sure that your policies cover your employees when they work in each state. If an employee tries to file a claim in a different state than your home office and your company does not have coverage, things could get a little messy. I have seen insurance companies deny coverage for a company not having paid premiums in a certain state.6. The reserve review process must be ongoing. As the insurance carrier will change the reserves when needed, you cannot just review them at random or once per year. The best time to start reviewing your company’s reserves is 90 days after your new policy starts. That gives you 3 months to review and negotiate any reserve reductions.
    Picture Of Man Holding Money Year End Strategies And Clock

    StockUnlimited

    7. As I have posted many times, YOU MUST HAVE ONLINE ACCESS TO YOUR CLAIMS. Waiting for a monthly or quarterly paper loss run is throwing away $$$. Online access is worth paying a little extra for the service.

    8. Make sure that you document all communications with any insurance personnel such as adjusters, auditors, agents, customer service. I always recommend sending a letter or email. Phone calls work well as a follow up to your letter or email. Phone calls are not a great standalone documentation tool.

    9. Read your Workers Comp policy from front to back before renewal. This is especially important if you are switching insurance carriers. Ask your agent for a copy of the WHOLE policy. You will find some very interesting requirements and agreements from the carrier.

    10. Work the numbers from the check you are going to write at renewal back to what was the basis for the charges. This is very TRUE for your yearly premium audit bill. You have the right to know what you are paying for at a renewal or an audit.

    11. Bonus Before you renew your Workers Comp policy, ASK QUESTIONS. No one in the insurance industry, even your agent, is going to frown upon your inquiries. Companies that ask questions save $$$.

    If you have any questions on the 10 Strategies, please drop me an email at [email protected]

©J&L Risk Management Inc Copyright Notice

Filed Under: Workers Comp Strategies Tagged With: insurance personnel, PEO, Unit Stat Date

Is First Dollar Coverage Provided in WC Policies?

October 15, 2010 By JL Risk Management Consultants

Term Of The Day – First Dollar Coverage

The first dollar coverage in A WC policy is the norm. The type of insurance in which payment of all losses up to the policy limits is provided without the use of deductibles. Because the insurer assumes more risk, the premiums will be higher. This form of insurance is also available for many types of policies other than workers compensation.

Comparison of First Dollar and the latest

Wikimedia Commons – Sar Maroof

©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: deductibles, limits

Can There Be Coinsurer on WC policy?

October 14, 2010 By JL Risk Management Consultants

Coinsurer-Term Of The Day

This is sometimes referred to as pie chart insurance (coinsurance). One of the parties that provides additional insurance to the same person or policy. A Coinsurer provides partial coverage along with other coinsurers. Coinsurers are generally used when the amount being covered is too large for a single insurer.

Flow Chart Of Coinsurer Life Insurance Policy

Wikimedia Commons

States such as Indiana allow for coinsurance on a WC policy if properly applied.  

©J&L Risk Management Inc Copyright Notice

 

Filed Under: Definition Tagged With: Indiana, pie chart insurance

Are Workers Compensation Premiums Similar To Business Tax?

October 13, 2010 By JL Risk Management Consultants

Workers Compensation Premiums  = Tax?

We often hear that Workers Compensation premiums are just part of doing business. Would premiums then be the same as a tax? The final answer is no. I thought I would list a few of the similarities and differences.

Picture Of Couple Talking To Businessman Workers Comp Premiums Assisting

StockUnlimited

The following are similarities between Workers Compensation premiums and payroll taxes – they are both:

  • Based on wages
  • Subject to audit
  • Require excellent record keeping
  • Controlled by an outside party (IRS,  Insurer, Rating Bureau,  Department of Insurance)
  • Complex in nature
  • Three-year window for questions or disputes
The following are differences between Workers Compensation premiums and payroll taxes:
  • Almost all Workers Comp policies are audited, less than 2% of all taxes are audited
  • You can shop and compare policy pricing, not taxes
  • Payroll taxes have very few inputs to the calculations, Workers Comp premiums have many more variables
  • Some of the variables that go into Workers Comp premiums and audits are more of an opinion than taxes (Class Codes, etc)

The bottom line is that Workers they are are not just part of doing business like taxes.  Worker’s Compensation was never designed to just be a component of doing business.  Do not just write a check as if you are paying for the electric bill.   Participate in the Worker’s Compensation audit process by reviewing everything that crosses your desk from before the policy is signed until the final audit bill arrives usually 30 days after your premium audit.  

If you feel something is wrong with your Workers Comp policies or audits, look them over very closely. Stop just writing checks is one of our old mottoes. The Workers Comp bill you receive is not just part of doing business. Check out how they figures were arrived at before paying the bill, especially in this economy.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premiums Tax Tagged With: Taxes, wages

Do I have Unearned Premium On My Policy?

October 13, 2010 By JL Risk Management Consultants

 Unearned Premium-Workers Comp Term

The unearned premium represents the portion of a Workers Comp Policy Premium that has been paid beyond the current period. The Unearned part of the term means the insured has not yet used that part of the premium in their policy. If the insurer or insured decides to cancel the Workers Comp policy there will be a refund due depending upon the final audit less any short-rate penalties.

Picture Of Calculator Unearned Premium Pen And Check

123RF

 There are many complaints handled by the state Insurance Commissioners on how the Unearned Premiums have been calculated. There was a sharp increase in premium refund complaints post-Katrina when property insurers were wholesale cancelling policies of coastal insureds.
 
©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: earned premium, short-rate penalties

What Is A Wrap Up Policy?

October 12, 2010 By JL Risk Management Consultants

Term Of The Day – Wrap Up Policy

Also known as a Contractor and/or Owner Controlled Insurance Policy, a Wrap Up Policy is a single policy naming all participants in a project as insureds. The use of a Wrap Up Policy for workers compensation provides coverage without each individual worker or contractor purchasing it’s own policy. The industry most likely to use this type of policy is construction.

Picture Of Contractor Wrap Up Policy Writing

Wikimedia Commons – Amanda Bicknell

©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: construction, individual worker

Risk I.D. # – Who Assigns it?

October 11, 2010 By JL Risk Management Consultants

Term Of The Day – Risk I.D. #

An employers Risk I.D.# is assigned by it’s rating organization. Each employer’s Risk I.D. # is uniquely it’s own. Through the use of this system, each employer’s past Workers Compensation experience can be isolated and tracked.

Graphic Of Rating Risk Star

StockUnlimited

 

©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: Workers Comp rating organization

True Core AIG Was Never Going To Fail – Insurance Part Solid

October 10, 2010 By JL Risk Management Consultants

 AIG TARP Not Needed For Insurance Part 

The true core AIG is still growing steadily in the Workers Comp arena. In the last post, I included a passage from a very recent publication by the US Treasury Department on the TARP program.

Picture Of True Core AIG Building

Wikipedia – Aig

As I have posted very often, the core of AIG’s business was never going to fail. The financial products area was failing, but AIG the insurer was doing well. The point that the Feds missed was that a bailout was never needed for the insurance services part of the business. I have friends that work for AIG that I verified this with before posting anything on the bailout.

 
The Federal Government would have done very well to split AIG into two parts. AIG later did this with the AIU unit. The balance sheet of the insurance business would have never required a bailout whatsoever. It was healthy and obtaining more business due to very precise and aggressive underwriting of certain markets. Even though they were huge, they did not just write policies to obtain the business.
 
Hand Pointing Towards True Core AIG Business Icon

StockUnlimited

Splitting the company into the two halves may have exposed the underbelly of a financial services area (not just AIG) that was very risky at best. However, in my opinion AIG Insurance Services would have had a good balance sheet. The Feds may have decided to mix the funds to not create a panic if AIG’s financial services area had to be bailed out on a standalone basis.

 
However, as we all know some of the biggest names in corporations (Donald Trump, etc.) specialized in splitting businesses into components. The profitable ones are usually kept and the unprofitable or marginal components are sold off – which is akin to the taxpayers bailing out the true core AIG.
 
I may be off-base with this post. If anyone would like a copy of the government publication, email me and I will send it to you. It is worth reading as it was our $$$.
 
©J&L Risk Management Inc Copyright Notice

Filed Under: AIG Tagged With: AIU, Feds, publication

AIG – Government Missed Point

October 8, 2010 By JL Risk Management Consultants

AIG Failure TARP Bailout

The Government Missed The Point of AIG.The following is a passage from a document published by the UNITED STATES DEPARTMENT OF THE TREASURY – OFFICE OF FINANCIAL STABILITY Troubled Asset Relief Program:

Picture Of Depart Of The Treasury Government Missed Badge

Wikimedia Commons – woodley wonderworks

Two Year Retrospective. This is better known as the TARP program. Yes, I did read this to see the Feds take on the crisis. Approximately 9 pages were dedicated to the AIG Bailout. I am going to include the passage and then comment on it in the next post.

 
Amidst these events, on Friday, September 12, American International Group (AIG) officials informed the Federal Reserve and Treasury that the company was facing potentially fatal liquidity problems. Although it was neither AIG’s regulator nor supervisor, the Federal Reserve Bank of New York (FRBNY) immediately brought together a team of people from the Federal Reserve, the New York State Insurance Department, and other experts to consider how to respond to AIG’s problems. Congress gave the Federal Reserve authority to provide liquidity to the financial system in times of severe stress, and it acted to fulfill that responsibility.
 

At the time, AIG was the largest provider of conventional insurance in the world, with approximately 75 million individual and corporate customers in over 130 countries. AIG’s assets exceeded $1 trillion. It was significantly larger than Lehman Brothers. It insured 180,000 businesses and other entities employing over 100 million people in the U.S. It was a large issuer of commercial paper and the second largest holder of U.S. municipal bonds. AIG’s parent holding company, which was largely unregulated, engaged in financial activities that strayed well beyond the business of life insurance and property and casualty insurance. Its financial products unit was a significant participant in some of the newest, riskiest, and most complex parts of the financial system.

 
Picture Of AIG Government Missed Lobby

Wikimedia Commons – David Shankbone

In the chaotic environment of September 2008, the Federal Reserve and Treasury concluded that AIG’s failure could be catastrophic. Among other things, if AIG had failed, the crisis would have almost certainly spread to the entire insurance industry, and its failure would have directly affected the savings of millions of Americans in ways that Lehman’s failure did not. Therefore, the government took action to protect the financial system.

 
AIG needed a durable restructuring of both its balance sheet and its business operations. Falling asset prices generated substantial losses on the company’s balance sheet. They also increased the payments to counterparties that AIG was required to make under the terms of credit protection contracts it had sold. AIG’s insurance subsidiaries experienced significant cash outflows related to a securities lending program, as the value of residential mortgage‐backed securities that they had purchased and loaned against cash collateral continued to fall.
 
©J&L Risk Management Inc Copyright Notice

Filed Under: AIG Tagged With: crisis, Feds, financial stability, FRBNY

Ballast Value Rights Workers Compensation Rating Ship

October 8, 2010 By JL Risk Management Consultants

Term Of The Day – Ballast Value

The Ballast Value comes from an old sailing term.  Sailors were known to put large rocks in the bottom of their ships to enhance stabilization.  

In general, the definition of Ballast is something, such as a weight, added to give stability , usually a ship.  It is an old English word. In Workers Compensation, it is the factor of the experience rating formula that prevents the x-mod from shifting too high or too low. As expected losses increase the value increases linearly not necessarily proportionally.  

The ballast variable in the E-Mod equation is G

NCCI Experience Mod Ballast Value Formula

Wikipedia

 
The ballast is not a penalty.  It is more of a safety net against massive E-Mod or X-Mod spikes.   
 
©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: safety net, stabilization

ERM – Enterprise Risk Management

October 7, 2010 By JL Risk Management Consultants

Term Of The Day – ERM

ERM is the acronym for Enterprise Risk Management.  A Practice that attempts to ensure the risk position of a company or organization as it tries to satisfy it’s goals. There are just a few steps to this practice but they are definitive. One is clearly defining the strategy and goals of a company and then forecasting any possible events that may keep the organization from achieving it’s goals.

Picture Of Hand Pointing ERM Enterprise Risk Management

StockUnlimited

©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: enterprise risk management, strategy

Workers Comp Claim Reserving – Follow It Closely

October 6, 2010 By JL Risk Management Consultants

Workers Comp Claim Reserving

Workers Comp Claim Reserving should be followed closely as part of your workers compensation premium reduction program.

One of the most mystifying areas of Workers Comp is in the area of reserving. I have written often on reserves, as believe it or not, they are just as mystifying to the claims adjusters and supervisors. I can guarantee that if you set down ten adjusters/supervisors in a room, give them the facts on a Workers Compensation file, you will receive a spectrum of reserve levels. Why?

Picture Of Files Claim Reserving On Table

StockUnlimited

One thing to point out early in this post is that setting reserves on any Workers Comp file is an art unto itself. I have seen software packages that will set the reserves for adjusters – SOME OF THEM WITHOUT AN OVERRIDE FUNCTION. You can add the software package to the spectrum of reserve levels in the room of claims adjusters and supervisors.

 
One caveat is that the expectation of accurate reserves at the start of a Workers Compensation file is not valid. The reserves that are placed on a file in the first 60 days are just not that accurate as the file has not had the time to mature and develop. Please note that in our file reviews we often see the reserves left unchanged throughout the life of the file after the 60 day initial reserve.
 
The other side of the coin is that if a company keeps reminding the adjuster to check the reserves on a file, the adjuster may analyze the file for an increase. Knowing which files to review with an adjuster and at what is the best time to review the reserves is crucial. As I have posted many times, your file reserves feed directly into your Experience Modification Factor (E-Mod).
 
I will not leave the self insureds out on this one. For budgeting purposes, your self-insured program should have Loss Development Factors (LDF’s) promulgated every year. If you do not, you are throwing away $$$. The reserves on your self insured Workers Comp files feed directly into the LDF just like the E-Mod. LDF’s can make or break a Risk Manager’s budgeting process.
 
Bottom Line – What is a Risk Manager or CFO or Company Owner or other person handling the Workers Comp to do about reserving? Check my post next time.
 
©J&L Risk Management Inc Copyright Notice

Filed Under: Workers Comp Reserving Tagged With: CFO, spectrum

Are There Explanation of Benefits (EOB) in Workers Compensation?

October 6, 2010 By JL Risk Management Consultants

Explanation of Benefits (EOB)-Term Of The Day

The Explanation of Benefits (EOB) is a new term in the Workers Compensation industry. Until recently, EOBs were common to the Health Insurance industry and are sent out to claimants so they are aware of the benefits that their insurance carrier is paying out on their behalf.

Picture Of Doctors Explanation of Benefits Insurance

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Recently, EOBs have been sent out to Workers’ Compensation claimants by a handful of carriers, self-insureds, and TPA’s.

Adjusters send these out as soon as they consider a claim compensable.  

©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: handful, health insurance

When Does A Hard Market Occur?

October 5, 2010 By JL Risk Management Consultants

Term Of The Day – Hard Market

A Hard Market is the term used to designate the period after a Soft Market. It usually occurs after a wide scale catastrophe which ends a soft market. During  this market, standards for underwriting become more rigid, premiums rise as well as profits, and competition lessens.

Picture Of Man On Computers Hard Market Monitoring

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A hard market in workers compensation can be very state specific.   California survived many in the 1990;s.  

This market condition occurs in any type of economic situation when there are more buyers than sellers.  Price increases are expected in this type of market. 

 

©J&L Risk Management Inc Copyright Notice

Filed Under: hard market Tagged With: catastrophe, competition

Soft Market – Are We In One Now?

October 4, 2010 By JL Risk Management Consultants

Term Of The Day – Soft Market

Part of a cycle, the term soft market describes the time when premiums are low, profits dwindle, and competition increases. As the number of claims increase, insurance carriers can no longer afford to lower premiums to increase volume. When this happens, the soft market portion of the cycle comes to an end.

Picture Of Hand Presenting Soft Market Money Increase

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Agents and underwriters also use the term buyers’ market.  

The term in general economics means that prices remain low due to more sellers than buyers.   

©J&L Risk Management Inc Copyright Notice

Filed Under: soft market Tagged With: lower premiums, soft market

California’s Governor Signs Bill Under Radar

October 1, 2010 By JL Risk Management Consultants

California’s Governor Signs Bill

The California Governor signs workers comp bill quietly.  California has a great system for finding out if the contractor you are about to hire has Workers Compensation insurance. 

Picture Of Governor Signs Bill People At the Back

cmo.smcgov.org


 You can also find out whether or not your potential contractor has been suspended from the Contractors State License Board for some reason. I am sure there are other states that have something similar, but this one seems to be the model of how it should look and operate.

 
The existing statute was renewed very recently. With Governor Schwarzenegger vetoing so many Workers Comp bills, I wanted to include one that showed a successful program that will be renewed.
 

Yes, it is California only again. However, what happens in CA will happen in the rest of the country in the next few years.

 
Gavel Lying Governor Signs Bill In Front Of Judge

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(1) Existing law requires private employers to secure the payment of compensation by obtaining and maintaining workers’ compensation insurance or to self-insure as an individual employer or as one employer in a group of employers. The Contractors’ State License Law requires every

licensed contractor to have on file at all times with the Contractors’ State License Board a current and valid Certificate of Workers’ Compensation Insurance or Certification of Self-Insurance, or a statement certifying that he or she has no employees and is not required to obtain or maintain workers’ compensation insurance coverage. Existing law, until January 1, 2011, requires a contractor with a C-39 roofing classification to obtain and maintain

workers’ compensation insurance even if he or she has no employees. Failure to comply with this requirement results in the automatic suspension of the license. However, with respect to a license that was active on January 1, 2007, and included a C-39 roofing classification, existing law, until January 1, 2011, requires the registrar of contractors, in lieu of suspending the license,

Woman Working Governor Signs Bill In Court

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to remove the C-39 roofing classification from the license if the contractor does not have workers’ compensation insurance coverage. This bill would extend the operation of those provisions until January 1, 2013, with respect to a license that is active on January 1, 2011, with a C-39 roofing classification. The bill would require the suspension of any license that, after January 1, 2011, is active and has had the C-39 roofing classification removed, if the licensee is found by the registrar of contractors to have employees and to lack a valid Certificate of Workers’ Compensation Insurance or Certification of Self-Insurance.

 
(2) Existing law requires an insurer who issues a workers’ compensation insurance policy to a roofing contractor holding a C-39 license from the Contractors’ State License Board to perform an annual payroll audit for the contractor. Existing law requires the Insurance Commissioner to direct the rating organization designated as his or her statistical agent to compile pertinent statistical data on those holding C-39 licenses on an annual basis and to provide a report to the commissioner each year. Existing law provides that these provisions are inoperative and repealed on January 1, 2011.
 
©J&L Risk Management Inc Copyright Notice

Filed Under: Governor Bill, independent contractor Tagged With: CA, license, Schwarzenegger

What Is Retaliatory Employment Discrimination Act (REDA)

October 1, 2010 By JL Risk Management Consultants

Retaliatory Employment Discrimination Act Is Important

The Retaliatory Employment Discrimination Act involves Workers Comp in certain cases.  

The Department of Labor’s Employment Discrimination Bureau (EDB) is responsible for the enforcement of the Retaliatory Employment Discrimination Act, or REDA. Through this act, employees who are involved in a Workers Compensation Claim are shielded from any form of retaliation or discrimination by their employers. Complaints of retaliation or discrimination must be reported within 180 days.

Vector Graphic Of Man Retaliatory Employment Discrimination Act

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©J&L Risk Management Inc Copyright Notice

Filed Under: Definition Tagged With: 180 days, EDB

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James J Moore
Raleigh, NC, United States

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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Recent Posts

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