ALAE Allocated Loss Adjustment Expense Definition

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Term Of The Day – ALAE

ALAE is the acronym for  Allocated Loss Adjustment Expense . In Workers Compensation, there are three areas of reserves and loss payments. They are indemnity, medical, and Allocated Loss Adjustment Expenses or just expenses.  

Picture Of Hand Carrying ALAE Plant With Coins
Wikimedia Commons – Cieresek

Indemnity benefits are defined very specifically.  The lines between medical and expenses has been blurred over the last few decades.  There is really no hard and fast standard for splitting payments between the two categories.   Some insurance carriers pay certain expenses under medical while other do not.  

 
For Experience rating purposes, the difference is very critical as Expenses are not part of the Experience Mod calculations. 

There has been much discussion about some of the ALAE being added to the medical reserves by the insurance claims staff. Charges such as rehabilitation nurses, medical bill review, PPO network, etc. are not consistently charged to the right area by the carrier or TPA. Allocated expenses for Workers Comp usually includes defense attorneys, Private Investigators or any type of outside services that aids in the investigation of or reduction of losses.
 
At one time, insurance carriers discussed whether or not to charge rehabilitation nurses under this category.  

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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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