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What Does Stair Step Reserving Mean?


Term Of The Day – Stair Step Reserving

The stair step reserving of Workers Comp is an age-old concern of any party to an insurance or TPA policy.   If loss reserves are raised by increments to cover the cost of claims expenses as they happen, the term stair stepping comes into use. If the claim reserves were to be charted, the resulting graph would look like stair steps. This can also be known as reserve creep.

Picture of Woman Stair Step reserving Workers Comp Concept
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The slang term amongst adjusters is reserving to pay bills or the next TTD payment.

Doing this to reserves is very harmful for many reasons:

  • Affect insureds E-Mod negatively
  • Self-insureds will not have an accurate Loss Development Factor (LDF)
  • Self-insured clients will not budget properly for future payments
  • Will cause actuarial or statistical work to have a built-in error
  • Use up the adjuster’s time by constantly having to take time to increase reserves in the system
  • Not giving reinsurers timely notice

Many years ago, some self-insureds wanted this practice in place to keep their Risk Factors low.   This blew up in their face eventually as all files were reserved too low and did not reflect the risk of future payouts which is the underpinning for reserves.

Many Risk Management,  insurance carrier, and TPA  processing systems have a large amount of built-in redundancy to alert claim supervisors and managers to stair step reserving.   When I perform loss run reviews, a reserve history chart will reveal this type of reserving in seconds.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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