Archives for March 2011

Workers Comp File Reserves – You ARE Running Late

March 31, 2011 By JL Risk Management Consultants

Workers Comp File Reserves Important To Catch Up

The Workers Comp file reserves important this time of year. I have posted over the last two weeks on the process of performing a Workers Compensation file reserve review as a way of reducing your E-Mods or X-Mods. I am using January 1 renewal policies as a reference point.

Vector Graphic of Workers Comp File Reserves Working on Office

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If you have a renewal date other than January 1, then please consult this article on the formula for calculating the due dates for your E-Mod reduction plan.

If I am correct, I left off with you having received your paper loss run or having online access. If you have online access, you have saved yourself at least 20 hours of work.

Now that is April 1, you have 90 days to analyze your loss runs, communicate your concerns, and possibly reducing your reserves. Doing this step incorrectly can have disastrous results on your E-Mod or Ex-Mod. Which files are you going to now contact your claims department on this week?

Graphic Of Workers Comp File Reserves Document Standing In A Row

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Some of our clients seems to think that the files that are the oldest or have the highest reserves are the ones to question. That is not necessarily correct. I have written many blog posts on Total Incurred. This is one time that the Total Incurred figure (Paid + Outstanding Reserves) is not as important as the Outstanding Reserves.

The Outstanding Reserves (Total Incurred – Paid) is basically what the Workers Compensation adjuster thinks will be paid out in the future of the claim. If it is a new claim with a serious injury, the Outstanding Reserve figure will be extremely high. Do not waste your time or the adjuster’s if this is the case. Monitor the claim and reserves for future reductions.

If your insurance carrier whether by paper report or online access (and you can run your own reports) can only send you the OPEN files, that will save some time. Negotiating a closed claim is very fruitless unless there were duplicate payments or there was subrogation on the file. That is water under the bridge.

One very obvious question is how much Outstanding Reserves are there on a certain claim or all of your claims? If the figure is low, then it may be best to leave it alone. Usually, approximately one third of the Total Incurred value should be Outstanding Reserves. That is a very, very rough approximation.

I will cover more on this the next time. I try to keep the posts from dragging on too much.

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Federalization Of Workers Compensation – Another Opinion

March 31, 2011 By JL Risk Management Consultants

Federalization Of Workers Compensation From Peter Rousmaniere

One of the more astute Workers Comp authors/bloggers recently wrote an article on The Federalization of Workers Compensation. I have been writing on this subject for over a year and it is good to see other opinions on what I think will be a major Workers Comp development.

Peter Rousmaniere Federalization Of Workers Compensation Picture

Peter Rousmaniere wrote a great article on the possibility of the Federal Government becoming more involved in Workers Compensation. As the Feds expand their “web of control”, I think there will be more monitoring of Workers Comp on a Federal level. Peter’s article can be found here.

I was the first one to coin the term Federalization of Workers Compensation. This started a trend of articles on the Federalization issue. I still think the Feds will look to control what happens with Workers Comp. As I have posted before, let’s examine what has happened over the last few years. The developments are:

The CMS (Medicaid/Medicare) wants all Workers Compensation data
The authority of the FIO or Federal Insurance Office is placed under CMS
The CMS will be providing the FIO will all pertinent data
By 2014, we are supposed to have nationalized health care, with national insurance
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exchanges.
Most insurance licenses are renewed on a nationalized basis even though they are state-based. The NIPR http://www.nipr.com/ has most state’s licenses processing.
The Internet with such sites as Linked, Jigsaw, ZoomInfo, etc have insurance personnel from all states discussing varied topics. Not long ago, other than intra-company and at conferences, how often did we all communicate with insurance personnel across state lines?

I could list many bullet points, but my goal is to be concise as possible. I am not saying that Workers Comp on a state basis will cease. I think that being very adaptive right now in Workers Comp is the best idea.

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E-Mod X-Mod Ex-Mod Question From One Of Our Readers

March 31, 2011 By JL Risk Management Consultants

Reader Question On E-Mod X-Mod Ex-Mod California

Yesterday I received a question on Workers Comp E-Mod X-Mod Ex-Mod in California.

Recently, our California Ex Mod greatly increased due to a few open claims that are dragging on and on. My policy doesn’t expire until mid-year and I am being charged an “endorsement – additional” by my carrier, this amount they explained is based on our Ex Mod increase. We have been in business for over 25 years and never had this issue arise. Is this normal practice of workers comp insurance for an additional premium amount endorsement?

Graphic of People Icon Carrying E-Mod X-Mod Ex-Mod Green Big Increase Arrow

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This is a slightly edited version of a question that we received yesterday on Workers Comp Ex-Mods or X-Mods in California. Would any of our expert readers want to input their opinions? I have my opinion which I will share later in the week. I wanted to see what our blog readers thought on this situation.

I received three other questions on E-Mod X-Mod Ex-Mods from three different states. Thanks for your questions. I will try to address them over the next two or three weeks.

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What Does Strategic Risk Management Cost?

March 31, 2011 By JL Risk Management Consultants

Term Of The Day – Strategic Risk Management

Strategic Risk Management (SRM) is the identification, assessment, and management of risk in an organization’s business strategy. When risks are realized under this process, action is taken swiftly. SRM involves predicting how possible events will affect the strategy and it’s execution, and what effect these events will have on the value of a company.

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For SRM to be effective, an organization must define what levels of risk are tolerable as a guide for decision making. SRM is a continual process and should be embedded in setting and executing strategy. SRM is a primary component of Enterprise Risk Management (ERM)

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How Do Excess Losses Affect My Premiums – Reader Question

March 29, 2011 By JL Risk Management Consultants

Term Of The Day – Excess Losses

In the Experience Modification Factor formula, Excess Losses are the amount of any single claim that is more than the cut-off point for inclusion as a primary loss. The NCCI experience rating formula uses the threshold of $15,000. The threshold varies in the formulas used by other rating bureaus.

Wikimedia Commons – Merzperson

The Loss (beyond $15,000) is usually discounted by a factor to reduce its impact so as to not penalize an insured for a few large losses versus numerous losses over the same time period.

The Primary Losses (Up to $15,000) peg to the Experience Modification Factor very heavily.

The Excess Loss figures appear as Ae in the above formula box.

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Is Workers Comp Claims Made And Reported Policy?

March 28, 2011 By JL Risk Management Consultants

Term Of The Day – Claims Made And Reported Policy

A Claims Made and Reported policy has many similarities to a Workers Comp policy. I often speak about reporting Workers Comp claims ASAP. While Workers Comp policies are not this type of policy. Many aspects are similar.

Picture of Document Claims Made And Reported Policy

Claims Made And Reported Policies can leave an insured in a very precarious position. That is why it is beyond critical to immediately report these claims. Time is of the essence – critical.

The US District Court for the State of Arizona ruled in [Emissions Technology, Inc. v. Twin City Fire Insurance Co., 2010 WL 4579250 (D. Ariz. Nov. 4, 2010)] that an insured reported the claim too late and was barred from benefits – ouch!

The policyholder received notice of a lawsuit filed by a former officer and director in October 2006, but did not report the claim to the liability insurer until November 2008.

The liability policy’s declarations stated that “coverage applies only to a claim first made against the policyholder during the policy period … [and] notice of a claim must be given to the insurer as soon as practicable, provided that such notice is given not later than 60 days after any manager becomes aware that such claim has been made.”

Endorsement No. 1 to the policy specified that “[a]s a condition precedent to coverage under this Policy, the Insureds shall give the Insurer written notice of any Claim as soon as practicable, but in no event later than sixty (60) days after the termination of the Policy Period, or Extended Reporting Period.”

The 60-day time limit shows up very often in insurance such as the Proof of Loss notice for a property damage claim. I was a little surprised to see the time limit at 60 not at 30 days.

In any insurance situation the quicker the claim is filed, the better off the insured usually finds themselves if litigation is necessary.

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Workers Comp Reserve Reduction Review Plan For Dates Other Than January 1st

March 25, 2011 By JL Risk Management Consultants

Reserve Reduction Plan For E-Mods

Workers Comp reserve reduction review plans need to be on schedule. I have devised a formula for calculating when your reserve or E-Mod reduction plan should begin overall.

As I posted last week, you should start three months BEFORE your Unit Stat date. Sound confusing? – Check out the formula.

Picture of Calculating Reserve Reduction E-Mod

Date that your reserve hit your NEXT YEAR’s E-Mod = Your renewal date + six months. For example, if 3/1/11 is your renewal date, your reserves tab to your E-Mod on 9/1/11.
Preferable Date to start your E-Mod reduction plan – Your renewal date + 2 months Preferably, you would want to start your reduction plan by 5/1/11. Why? You cannot just call up your claims adjuster and say reduce these reserves today. It just does not work that way.
Latest time to start your E-Mod reduction plan – Your renewal date + 3 months You would need to start your E-Mod reduction plan on 6/1/11 at the latest.

If your company is past the three month barrier, you may need to bring in outside non-agent expert help to get your E-Mods reduced. We have been able to reduce reserves with only two weeks before the Unit Stat date.

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Workers Comp Reserve Reduction Plan – Is Yours In Place?

March 25, 2011 By JL Risk Management Consultants

Reserve Reduction Plan And The Unistat Date

I wrote last week on the timing and deadline for having your Workers Compensation reserve reduction plan in place. If your company has not begun with the plan, you are throwing away Workers Compensation Dollars.

If your renewal date is January 1, you should by now have obtained your company’s or agency’s Workers Compensation loss runs. If you do not have them, you are already running behind.

Remember, you have until 6/30/11 at 11:59 PM, to reduce your Workers Comp reserves which in turn will reduce your E-Mod. That is your goal – to reduce NEXT YEAR’S E-MOD.

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You should have a list of claims that you wish to discuss with your adjuster on the reserve levels. A caveat – KNOWING WHICH CLAIMS to discuss is critical. Discussing the wrong claims may cost your company more $. Please do not ask an adjuster to reduce all your reserves by 15%. That will never happen and ruin the working relationship you have with your adjuster.

If you do not know who your Workers Comp adjuster is, then you are falling way behind. Your loss run should indicate the person that is handling each claim.

As I have said many times in this blog, if you have online access you are way ahead of the game. Having FULL online access to your claims will save you hours and hours of work on your reserve reduction plan as you can see the status and the reserve levels any time you wish to access them.

The last time I posted on this subject, I received a few questions concerning renewal dates other than 1/1 and the corresponding reserve reduction plan timing. Check out my next post.

If you ever feel you are in over your head or that your carrier is not responding to your request, please contact us. Reserve reductions are part of what we do as a company.

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Workers Compensation Captives – Are They Worth Exploring?

March 25, 2011 By JL Risk Management Consultants

Workers Compensation Captives – A Legitimate Yet Complex Alternative

Workers Compensation Captives have come to the forefront as a possibly viable alternative for Workers Compensation coverage. Last week, I decided to explore Captives further by attending the CICA conference in Tucson, AZ.x

Picture Of Pointing Finger Workers Compensation Captives On Insurance Text

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After attending many of the sessions, I came away with a few thoughts and questions. I thought I would briefly cover them.

Are captives for every company? No, as it is a form of modified self-insurance, a small company could not survive the impact of a very large claim or a number of claims over a short amount of time.

What companies would find it the most advantageous to use captives? For Workers Compensation, I would say a very large company that does not have enough assets in a certain state to qualify for self-insurance. A great example is a very large trucking firm that has a large home office complex with terminal in multiple states.

Is there one domicile that is better for captives than the others? No, I do not think there is one domicile that is superior to another in every instance. I do like the offshore domiciles. As I have said very often, a stroke of the President’s pen, a ruling by the IRS, or a bill passed by Congress could change the onshore domiciles overnight. That would not happen with an offshore domicile.

Renting Workers Compensation Captives resort

Wikimedia Commons – Venturalofts

Are rent-a-captives still a viable option? I think this is the forefront of future Workers Comp insurance arrangements. Renting a cell from a captive allows the same right and tax advantages as owning a regular captive. The fixed or overhead costs would be much smaller than starting a captive.

What is the one main disadvantage to captives? I think it is a very simple concept that has been complicated as a profit motive for companies. The more complicated it seems, the more pseudo-knowledge is produced. Captives are not that complicated.

Where can someone learn about captives quickly? Google Workers Compensation Captives, there are hundreds of websites with a large amount of free information.

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Expected Losses – Where Are They Located On My EMod Sheets?

March 22, 2011 By JL Risk Management Consultants

Expected Losses – What Are They and Where To Find Them?

The Expected Losses for an employer is the amount of loss an average firm reporting the same exposures in the same classifications would have had during the Experience Period (usually three policy years).

Wikimedia Public Domain Use

Each rating year the NCCI or respective rating bureau calculates the Expected Loss Rates for each classification and each of the three years in the Experience Period. These rates are based on the reported exposures and claim costs for injuries occurring during the Experience Period within each classification for all companies in their respective state.

They are split into two types of losses. In most states, NCCI splits the Expected Losses as

Expected Primary – Up To 15,000 of Total Incurred (Paid + Reserved). The Primary portion charges more to the Mod than the Excess Losses.
Expected Excess – Over 15,000 of Total Incurred.

An insured’s Expected Loss is calculated for each classification and each year in the Experience Period by multiplying the Expected Loss Rate by the insured’s reported exposures by year and classification. The sum of these amounts is the insured’s Expected Loss.

The very basic formula for an E-Mod is Actual Losses / Expected Losses. If the Actual is more than the Expected Losses, the E-Mod or X-Mod is will be greater than one. If the opposite is true, then the E-Mod X-Mod will be less than one.

Safety programs still affect the Mods more than any other Mod reduction method. Remember that the Mod system compares employers with similar classification codes.

If your business is safer than your competitor’s operations, then the E-mod or X-Mod system will promulgate a lower Mod for your company. Promulgate means to calculate and publish a Mod.

Any Rating Bureau’s system increases the Mod more if a company or organization has multiple small claims where the claim was considered an indemnity claim. A number of small indemnity claims will increase the Mod more than one big claim. Why?

The Mod systems look at the number of claims increasing in a policy year. An employer’s risk of one or more of those claims as turning into a larger file increases if there are many claims in a policy year.

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What Is A Functional Capacity Evaluation (FCE)?

March 22, 2011 By JL Risk Management Consultants

Functional Capacity Evaluation – Series Of Physical Tests

FCE or Functional Capacity Evaluation in Workers Comp is a series of tests administered to a claimant by a physical therapist or other health care professional.

Picture of apple and heart with stethoscope Functional Capacity Evaluation Frequency on Table

FCEs can be beneficial in determining an injured worker’s restrictions and capabilities. FCE evaluators can review job descriptions and make a determination

regarding whether the injured employee is capable of performing certain jobs. After a claimant undergoes an FCE, the evaluator typically provides a detailed report on the results, including the claimant’s capabilities and restrictions.

Some FCE’s can also show if the tested injured employee gave full effort on the tests. The full effort test produced a few negative reactions questioning whether or not the test actually can show a less than full effort.

Functional Capacity Evaluations keep the injured employee from reinjuring themselves when the employee returns to work. The FCE’s are usually given to evaluate the injured employee for work hardening. The FCE’s can also be administered at the conclusion of the work hardening program.

Functional Capacity evaluations can be a successful tool for a safe return to work. The treating physician usually reviews them at the return to work assessment appointment.

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Advisory Loss Costs Do Not Appear On Your Workers Comp Policy

March 21, 2011 By JL Risk Management Consultants

Advisory Loss Costs Are Published By Rating Bureaus

Workers Compensation Advisory Loss Costs (ALC) are published at state-specific times during the year. ALC’s are not to be confused with the insurance companies’ premium rates per classification code.

Graphic Of Tree Dollar Sign Advisory Loss Costs ALC

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Most insureds will never see these rates as the insurance carriers file deviations to the ALC’s. The deviations are known as Loss Cost Multipliers (LCM’s). The LCM’s are difficult but not impossible to find. The state Departments of Insurance or Workers Compensation Boards almost always agree with the LCM’s published by the insurance carriers.

Rarely, the carriers will actually file lower schedules. Usually, the insurance carriers feel they must have sufficient overhead beyond the ALC’s. I have never seen a state insurance department reject a carrier’s insurance filing to increase the ALC.

California’s Rating Bureau WCIRB refers to them as pure premium rates.

During a recent premium audit that we performed for an insured, we found the filed insurance carrier’s rate to be 211% over the ALC. Ask your insurance agent to include what the state’s ALC’s are for each classification code when you are receiving quotes.

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Pure Risk Keeps Insurance From Being Seen As Gambling

March 18, 2011 By JL Risk Management Consultants

Pure Risk Is Not Gambling

Wikimedia Commons – Antoine Taveneaux

Pure risk keeps the insurance industry from being considered gambling. With a pure risk you have three situations:

Chance of loss
Chance of no loss
No chance of gain

With Workers Compensation, an employee may be injured while on the job or may never incur a job injury. The insured would never receive a gain from either #1 or #2 above occurring. Pure risk is one of the underpinnings of insurance theory.

Gambling can occur in the case of:

Chance of loss
Chance of no loss
Chance of gain

The #3 in the gambling list differentiates gambling and insurance. Insurance may possess quite a few similarities to gambling.

Insurance makes the injured party WHOLE again. The insured is entitled to what makes them the same as they were before the accident.

In referring to accidents, I mean:

Car Accident
Homeowner Loss
Workers Comp Accident
Loss of Business Use
Hundreds of other insurable risks*
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An old friend of mine said that basically the insurance company bets that you will not have a car accident and you are betting that you will. The premium represents the bet. I heard this same scenario with everything reversed – the insured best they will have no accident and the insurance company bets that you will have an accident.

When I was in Las Vegas, I was betting on the craps table. The young lady asked me if I wanted insurance on that bet. I just smiled and said yes I will take the insurance. Wow, that was a confusing term, I just took out insurance on a gambling bet so that if I lost, I would at least be made whole again.

Did I just turn a gamble into a pure risk?

Update – The Internal Revenue Service has been pursuing Insurance Captives as not being true insurance as there is no chance of a fortuitous loss.

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Premium Audit Bill – D-Day Is Date You Receive It

March 17, 2011 By JL Risk Management Consultants

D-Day – Premium Audit Bill Deadlines

Why would I post that this is premium audit D-Day? A majority of our clients renewed on 1/1/11. January 1 is still the date that a majority of companies renew their Workers Comp policies.

Wikimedia Commons – Photos Public Domain

The premium audit cycle is that an insurance company premium auditor will have visited the companies renewing on 1/1 to audit the payroll for 2010. As with most of our clients, the auditor visited the employer in January or February.

An audit bill was then published along with the reasons for the increase in premiums. The bill, if not paid, has likely sat for about 3o days and the insurance carrier is now starting to turn up the heat to get the bill paid. This is when we receive urgent calls for assistance.

What do you do? The three WORST things to do are:

File the bill away and ignore it
Pay the bill without even reviewing how the auditor arrived at the numbers
Start a “shell” dispute just to buy more time

Wikimedia Commons – Tony Webster

As a minimum, the auditor’s numbers should be reviewed heavily to make sure your company is in agreement with them. If there are any questions on the numbers, all questions should be made in writing to the auditor. Sometimes, the policy or audit bill will give you a different person to contact if you have questions.

I do not recommend calling as email provides you with a paper trail of documentation if your questions are turned into a valid dispute.

If you ever feel you are in over your head with all these numbers and rules, it may save your company time and money to contact a non-agent professional for assistance. That is a shameless plug for our company.

If the questions you have sent are not answered timely, then you could raise a dispute on paying the premium audit bill until your questions are answered.

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CICA Captive Conference 2011 Interesting Alternative Insurance

March 17, 2011 By JL Risk Management Consultants

CICA 2011 Conference – Tucson AZ was a learning experience

I attended the CICA Conference this week in Tucson AZ. The conference provided a large amount of information that I will have to sift through and post some of the important info on this blog next week.

Graphic of Green Increase Arrow CICA With Dollar Sign Under

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One thing I quickly learned was how fast domestic captives are growing, overall. There are many states that are now domiciles for captives, including Missouri. There were many offshore captives represented at the conference including Bermuda, USVI, and the Cayman Islands.

Captive insurance arrangements can be complicated. I do think this is where insurance markets are headed if the current economical woes persist. Captives are a valid alternative to the traditional insurance markets. I would not have said that five years ago.

A quick definition of Captives –

Captive insurance refers to insurance that provides coverage for the group that established business. It is a type of insurance that provides to its parent company. Captive insurance company is a corporation whose stock is owned by one or a small number of companies and which handles all or a part of the insurance needs of its shareholders or their affiliates. Generally, under captive insurance, the parent company can deduct the premiums set aside as loss reserves. Captive insurance draws a dichotomy between true insurance and arrangements

which have been found to constitute, in substance, self-insurance.

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Workers Comp File Reserves – You May Be Running Late

March 17, 2011 By JL Risk Management Consultants

Workers Comp File Reserves Timing Important

I try to post information on Workers Comp file reserves this time of year. Why? The majority of Worker Compensation policies renew on January 1^st.

Wikimedia Commons – Daniel R. Blume

The Unit Stat date for those policies is 7/01/11. Your companies Unit Stat date will occur 6 months AFTER your policy expiration date.It will not count for the current or prior policy year.

The Unit Stat date pegs your E-Mod reserves for the NEXT policy period. As posted often in this blog, my advice is to start your Workers Comp reserve reduction strategies by Mid-March, at the latest. Trying to negotiate reserves at the last minute with an insurance carrier will be an exercise in frustration.

Picture Of Hand Passing Workers Comp File Reserves Secret Letter

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The SECRET is knowing which claim reserves to negotiate and which to leave alone.Stirring up interest in the wrong file may cause a reserve increase instead of a decrease.If you have your loss runs handy or can obtain them online, then you have saved yourself two weeks in obtaining them.

Unfortunately, there is no structured answer on which files to examine and which to leave alone. As you look over the loss run, it is best to know the current medical status of your injured employees. There may possibly be a valid reason for an extremely high reserve figure.

If you have access to the adjuster notes, they will sometimes suffice for an actual medical status. If you have to obtain a medical or claims status from an adjuster, use email. Never call an adjuster saying that your company’s reserves are too high. You need some type of number analysis to substantiate your position.

Calling an adjuster went out of style ten years ago. I do not recommend texting an adjuster. That is too informal.

The bottom line is to get started NOW on your E-Mod for NEXT Year. You may be already running 17 days behind.

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Actuarial Report Contains Very Important Workers Comp Info

March 17, 2011 By JL Risk Management Consultants

Actuarial Report Important For Budgeting

The actuarial report consists of a document or other presentation, prepared as a formal means of conveying the actuary’s professional conclusions and recommendations, of recording and communicating the methods and procedures, of assuring that the parties addressed are aware of the significance of the actuary’s opinion or findings and that documents the analysis underlying the opinion.

Vector Graphic Of Actuarial Report Concept

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Insureds who are using a Captive, Large Deductible, or Self Insurance Workers Compensation program should pay very close attention to the variables that are input into the Actuarial Report. On page 31 of the Actuarial Guidelines, all the components of an actuarial report are listed in detail. They are below.

The Actuarial Opinion must include assurance that an Actuarial Report and underlying actuarial workpapers supporting the actuarial opinion will be maintained at the company and available for regulatory examination for seven years. The Actuarial Report contains significant proprietary information. It is expected that the Report be held confidential and not intended for public inspection. The report must be available by May 1 of the year following the year-end for which the opinion was rendered or within two weeks after a request from an individual state commissioner.

Hand Presenting Actuarial Report Business Icon

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The Actuarial Report should be consistent with the documentation and disclosure requirements of ASOP # 9. The Actuarial Report should contain both narrative and technical components. The narrative component should provide sufficient detail to clearly explain to company management, the regulator, or other authority the findings, recommendations and conclusions, as well as their significance. The technical component
should provide sufficient documentation and disclosure for another actuary practicing in the same field to evaluate the work. This technical component must show the analysis from the basic data, e.g., loss triangles, to the conclusions.

The Report must also include:

An exhibit which ties to the Annual Statement and compares the Actuary’s conclusions to the carried amounts;

Summary exhibit(s) of either the actuary’s best estimate, range of reasonable estimates, or both, that led to the conclusion in the OPINION paragraph regarding the reasonableness of the provision for all unpaid loss and loss adjustment expense obligations;Set NextGEN featured image

Documentation of the required reconciliation from the data used for analysis to the Annual Statement Schedule P

Extended comments on trends that indicate the presence or absence of risks and uncertainties that could result in material adverse deviation; and

Extended comments on factors that led to unusual IRIS ratios for One-Year Reserve Development to Surplus, Two-Year Reserve Development to Surplus, or Estimated Current Reserve Deficiency to Surplus, and how these factors were addressed in prior and current analyses.

Please note that the above is very general and not necessarily Workers Comp specific

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Pure Captive

March 16, 2011 By JL Risk Management Consultants

Term Of The Day – Pure Captive

A pure captive is the most basic of all captive arrangements. In the case of a “pure” or “single parent” captive insurer, the financial stability of the third party is completely dependent on the financial health of the parent. Commonly, the assets of such captive insurance companies consist only of the unsecured obligations of the parent facility. Thus, a failure of the parent facility will necessarily cause a failure of the captive insurer.

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Is Carpal Tunnel Syndrome Permanent Disability?

March 15, 2011 By JL Risk Management Consultants

Carpal Tunnel Syndrome – Painful Condition

The condition Carpal Tunnel Syndrome is pressure on the median nerve — the nerve in the wrist that supplies feeling and movement to the “thumb side” of the hand (the palm, thumb, index finger, middle finger, and thumb side of the ring finger). It can lead to numbness, tingling, weakness, or muscle damage in the hand and fingers.

Hand With Carpal Tunnel Syndrome Illustrating

Wikipedia – BruceBlaus.

This condition has been observed in conjunction with De Quervains Syndrome.

The area in your wrist where the nerve enters the hand is called the carpal tunnel. This tunnel is normally narrow, so any swelling can pinch the nerve and cause pain, numbness, tingling or weakness. This is called carpal tunnel syndrome.

Carpal tunnel syndrome is common in people who perform repetitive motions of the hand and wrist. Typing on a computer keyboard is probably the most common cause of carpal tunnel. Other causes include:
• Sewing
• Driving
• Assembly line work
• Painting
• Writing
• Use of tools (especially hand tools or tools that vibrate)
• Sports such as racquetball or handball
• Playing some musical instruments
The condition occurs most often in people 30 to 60 years old, and is more common in women than men.

The condition has been reduced by 50% in the last few years. That is amazing.

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Partial Retention And Workers Comp Deductible Comparison

March 14, 2011 By JL Risk Management Consultants

Partial Retention And Deductible Comparison

Partial retention is a very common risk management strategy. In Workers Compensation, partial retention is usually attained by using one of the following strategies:

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Self insurance with reinsurance in case of catastrophic claims or a bad claims year
Small deductible program
Large deductible program

I am not a big proponent of small deductible programs as I have rarely seen any cost savings with this type of plan. Partial retention is analogous to your car insurance deductible.

The Workers Comp Community rarely uses this term. It comprises more than just a single claim retention. A group of claims or aggregate retention involves paying a group of claims like a self insured until a sum total amount of claims is reached. The aggregate retention level usually occurs at sums over $1 million or greater.

I have heard only Risk Managers use this somewhat archaic term. A normal partial retention totals $250,000 per claim. The rating bureaus consider any amount retained over $100,000 as a large retention program.

The word deductible should be used in most cases. However, one may hear or read this archaic term from time to time.

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Who Is CICA?

March 11, 2011 By JL Risk Management Consultants

Term Of The Day – CICA

CICA or Captive Insurance Companies Association is an association of risk managers formed to educate, inform, support and provide valuable networking opportunities to members and interested parties about captives, regardless of domicile or structure. CICA has no jurisdictional or commercial ties. Members come from a wide range of industries with almost half the membership domiciled in Bermuda, with another quarter domiciled in Vermont.

Picture Of Hand Holding Blackboard CICA With Risk Management Info

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CICA has joined forces with other state captive and risk management organizations to create a legislative affairs organization known as the Coalition of Alternative Risk Funding Mechanisms (CARFM).

I have been to three of their conferences. While they are not the largest Captive Conference, the access to the international and domestic regulators is superior to many of the conferences.

The organization’s main webpage can be found here. Their upcoming conference is March 12-14, 20q6 in San Diego. The conference is a great alternative to the State of Vermont captive conference. I have not been to the one in Vermont, so I will not comment on which conference is the better one to attend each year.

Other States Coverage In All Workers Comp Policies – Probably Not

March 10, 2011 By JL Risk Management Consultants

Term Of The Day – Other States Coverage

Workers Compensation insurance can be very tricky when it comes to other or all states coverage. Many employers such as trucking/transportation companies are in dire need of having other states coverage for their drivers. Workers Comp used to be written on an all states coverage basis if requested. Insurance carriers now require listing any/all jurisdictions in Section 3 of the policy.

2021 – Update

Trucking and transportation companies need to have insurance for any state their drivers pass through on their routes. Why? Because we have seen over the last few years where the accident location state allows the injured employee to claim benefits for that state.

Having coverage for just the jurisdictions where terminals are located may cause your carrier to deny coverage as there was no listing in the Dec page for that jurisdiction. The Walsh rule may not apply in all states.

Graphic Of Truck States Coverage In Circle

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It is recommended reading once you receive your Workers Compensation policy. An employee will be covered under the Workers Comp policy for only those states specifically spelled out in the policy (Section 3C). If the state is not listed, then there is no coverage.

Certain monopolistic fund states cannot be covered under other states coverage. A separate policy has to be written for each of these states. For instance, Ohio would require your company to purchase a policy from the monopolistic state fund carrier.

I have been involved with claims where the employer had to pay out-of-pocket as the risk manager did not have coverage for the monopolistic state listed in the policy. A further complicating factor is states allowing the injured employee to choose the applicable jurisdiction for filing his/her claims.

Insurance Buyers Swindled In Multinational Scam

March 9, 2011 By JL Risk Management Consultants

Insurance Buyers Beware – All May Not Be As It Seems

A large number of Insurance buyers were recently swindled in scam. While reading a recent issue of Business Insurance, I couldn’t help but read the article on the front page with the headline “Insurance buyers swindled in scam, prosecutors charge. The feds are accusing the defendants of selling bogus liability coverage.”

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Three defendants, who are all named in the article, include an accountant in St. Kitts, West Indies, and brokers in both Texas and Quebec. The indictment was brought in U.S. District Court in Houston and accuses these defendants of issuing policies to nursing homes, apartment complexes and other businesses all across the country, and for providing bogus financial and reinsurance information to policyholders.

One of these policyholders was the operator of a tour boat that capsized killing 20 tourists. Allegedly, the claims were denied for the accident by the backdating of documents to make it appear that there was never coverage placed.

According to the article some of the accused have been arrested. However, there are at least three under indictment who are among the missing and are named in the article along with a plea from the feds for help in locating them.

Picture Hand Holding Board Insurance Buyers Protection Concept

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Besides issuing fake policies, providing worthless Eurobonds, and backdating documents, one member of this group is also alleged to have tried to pressure his daughter into lying to a grand jury investigating the case. Her name had been forged as claims manager and her father wrote her a lengthy note telling her just how to answer the grand jury’s questions.

As a whole, and if convicted, this illustrious group faces statutory maximum sentences of 20 years per count on one count each of conspiracy and money laundering and nine counts of wire fraud. Separately, one of the defendants also faces 20 years on an obstruction of justice charge.

Good luck to the feds! I hope they find them all, try them all and see how it all shakes out.

Bill Review and Disability Claim Management Very Expensive

March 9, 2011 By JL Risk Management Consultants

Bill Review and Disability Claims Are Very Expensive

Bill Review and disability claims have come to the forefront as two of the most outrageously expensive costs of Workers Compensation.

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A huge concern, especially in this economic climate, is that companies cannot survive with exorbitant Workers Compensation claims and disability claims costs. One way that employers can be allowed to control their Workers Comp program, is to add bill processing review and disability claim management to their Workers Compensation program.

Since baby boomers are staying on the job longer, the potential for many more claims is a reality. Find a claims reviewer and disability claims manager who has a history of conferring with clients and has only their best interests in mind. Ask if they have negotiated with several networks and if their partners are only those who can help significantly lower the cost of Workers Compensation bill review and disability claim management.

Bill review and disability claims management are overwhelming tasks, and should only be done by those with the knowledge and experience to effectively cut costs wherever possible.

Find consultants who are well versed in the field of Workers Compensation and its complexities. Look for one who offers a wide range of services, including bill review and disability claim management, for insurance cost containment whether you are a public entity or a private business.

What Is A Cell Captive?

March 9, 2011 By JL Risk Management Consultants

Term Of The Day – Cell Captive

A cell captive is either a rent-a-captive or a sponsored cell captive. The main goal is to lower risk by separating the underwriting data and results into distinct entities. This allows for each cell to only be responsible for its cell and not for the underwriting results of another cell. If one of the cells would fail, then the other cells would have no legal or monetary responsibilities for the failed cell. This lowers the risk dramatically.

an illustration of White and red dice Cell Captive in Risk

Wikimedia Commons – Val42

Aggregate Stop Loss Reinsurance

March 8, 2011 By JL Risk Management Consultants

Term Of The Day – Aggregate Stop Loss Reinsurance

The aggregate stop loss reinsurance is a type of reinsurance is becoming very rare and expensive. A form of excess of loss reinsurance which indemnifies the reinsured against the amount by which the re-insureds losses incurred during a specific period exceed either an agreed amount or an agreed percentage of some other business measure. The reinsurer and their insured must have some pre-agreed level that once attained shifts the total risk to the reinsurer.

US 20$ Aggregate Stop Loss Reinsurance series 2006

Wikimedia Commons – Design from the United States Treasury Department

I have seen this type of reinsurance often in alternate risk work comp policies such as large deductible, captives, and self insurance. One the aggregate level of workers comp claims is “busted”, the reinsurance carrier will be 100% responsible for all the claim payments.

The aggregate is usually a very large amount. The reinsurer does not want to be on the hook for all payments unless the aggregate is huge. I have seen an aggregate level of $20 million or higher in some agreements.

There are many variation on the aggregate stop loss reinsurance theme.

Insurer Sponsored Agency Captive

March 7, 2011 By JL Risk Management Consultants

Term Of The Day – Insurer Sponsored Agency Captive

These types of captives are sponsored by very large insurance carriers. They are almost a hybrid type of captive as the operation is borrowed from an agency captive and a cell captive. On the surface, they seem like any other captive. However, there are major differences.

Vector Of Umbrella Agency Captive With Dollar Sign

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The mega-insurance carrier will usually set up a very large captive in one of the offshore domiciles that allow the least regulated operations. The insurer will provide all of the usual captive services such as fronting, etc. The insurance agencies buy part of the captive shares which requires them to place a minimum amount of business with the agency captive.

Residual Market (RML) Insures A Large Proportion Of Employers

March 4, 2011 By JL Risk Management Consultants

Term Of The Day – Residual Market (RML)

One of the reasons that alternative Workers Comp insurance is becoming so popular over the last few decades. Some states have enormous residual market losses that must be passed along to policyholders of regular voluntary market insurance.

Picture Of Business People Holding Hands Residual Market And Waking In Row

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The RML now insures approximately 30% of the market nationwide. The RML load is the additional “premiums” included that represent the loss generated by the state residual market pool and passed on to those insured in that state.

Onshore Captive

March 3, 2011 By JL Risk Management Consultants

Term Of The Day – Onshore Captive

The onshore captive are a viable alternative to offshore captives such as Bermuda. The oldest and largest onshore domicile is Vermont. The states that are now domiciles for onshore captives are:

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Alabama
Arizona
Arkansas
Colorado
Delaware
District of Columbia
Florida
Georgia
Hawaii
Illinois
Kansas
Kentucky
Maine
Missouri
Montana
Nevada
New York
Rhode Island
South Carolina
South Dakota
Tennessee
Utah
Vermont
Virginia
West Virginia

Over the next few years, this list will grow to include almost all states in the US.

Workers Comp Claims Adjusting Services – Getting The Best Deal

March 2, 2011 By JL Risk Management Consultants

WC Claims Adjusting Services

The Claims adjusting services can be found with an RFP for Workers Comp services. This is one of the “touchiest” subjects in Workers Comp right now with employers and governmental agencies. Risk Managers, company owners, CFO’s, and anyone in charge of their company’s Workers Compensation program are becoming very aware they may be spending too much in this area.

Picture Of Business People Adjusting Services Shaking Hands

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Quite often, a carrier or Third Party Administrator (TPA) will offer a package inside of their claims adjusting bid that may not be the most beneficial to their client. This may not be done on purpose. It is just the result of the very complicated services structure such as medical bill processing that exists in Workers Comp and disability claims environment.

One recent comment from a Risk Manager/CFO was that examining RFP’s for Workers Comp claims handling and all the other services was akin to “shopping for a car with all the different options.”I can understand that point. In looking over RFP’s from across the nation, there seems to be more attention to this point.

Many governmental agencies’ RFP’s now ask for only the claims processing fees, not the medical bill processing or the rehabilitation nurse fees to be calculated into the bid. In fact, quite a few have their own established “ala carte” services they have purchased to more effectively breakdown the costs.

Picture Of Ala Carte Adjusting Services Black And White

Wikipedia – White Star Line

A very large city school system has purchased each part of the Workers Comp claims adjusting services separately by purchasing each service from a different vendor. That may be taking the “ala carte” idea a little far.

I am presently reading an RFP from Indiana where the governmental agency specifically required a bid for claims adjusting and processing only.If any other services were mentioned, the bid would automatically be removed from consideration.

Are we getting to the point where the person(s) responsible for choosing the Workers Compensation claims adjusting vendors are going to have to do multiple RFP’s? If so, there would need to be at least five different ones.

I will be covering Workers Comp medical bill processing in my next post. It may be a shocker to some – which is a good thing.

Certificate of Compliance

March 2, 2011 By JL Risk Management Consultants

Term Of The Day – Certificate of Compliance

The certificate of compliance is important doc.A certificate which authorizes that a company is in compliance with municipal, state, or industry specifications, is a very important document for many business models. A compliance certificate can come in many forms; as a city permit stating that a business is fully bonded and insured, as a state requirement for food health in restaurants, or even at a certificate from the better business bureau stating that a business receives their seal of approval. Certificates of compliance in insurance is usually supplied by the State Insurance Commissioner’s Office.

Vermont Workers Comp – Coming To An End?

March 1, 2011 By JL Risk Management Consultants

Vermont Workers Comp Ending?

Will Vermont Workers Comp fade away? Vermont recently appeared on the radar for Workers Comp. The state had been relatively quiet for many years. If there was a state that could possibly make 24 hour coverage work, Vermont would be one of my top picks.

Wikimedia Common – Cardinalemile

Having handled claims in the state many years ago, I would say Vermont and New Hampshire are very independent-minded states. Vermont was a very complex state for handling Workers Compensation claims.

There were many recent press releases on Vermont replacing Workers Comp with 24 hour coverage.One point that was missed, is the state is looking to replace the medical treatment part of the claim.I saw no mention of a complete dismantling of the Workers Comp system. The weekly benefits for injured workers would not be affected.

As I have posted often, almost any state could use the AFLAC model to replace their Workers Comp system if done properly. That does not mean it will happen any time soon. California attempted a modified version of 24 hour healthcare. It failed miserably.

One area that I did not want to delve into very far is Vermont pursuing a healthcare plan that would make them very independent of the upcoming healthcare federalization.