Workers Comp Success Bottom Line Measurements
Workers Comp success (or failure) bottom line measurements are readily available for employers. I have read on a few blogs and received questions recently concerning how a Workers Compensation program can most easily measure its success or need for improvement. This is a very complex measurement as there are so many variables that are not in control of the personnel or departments that administrate over the program.
I am not a great advocate of benchmarks as each company operates differently. That is the nature of the business world. I have seen many benchmarking studies that have basically tried to compare apples with oranges using the same comparison system.
There are basically four sets of numbers that measure how a Workers Compensation program is working. They are:
- E-Mods/X-Mods
- Current reserve levels for claims included in the Experience Period
- Employer measurements provided by insurance carriers such as lag time, etc.
- Bottom line – premium
I want to be fair to self insureds as I am often reminded to include the self insurance angle on my posts. The measurements for self insureds are:
- Loss Development Factors (LDF’s)
- Current reserve levels (including all claims)
- Same as above #3
- Bottom line – payments made over the life of the claim
There are differences between measuring the voluntary market where a premium is paid and a self insurance program. The two types of programs should never use the same internal measurements. Other programs such as large deductibles and captives should use a hybrid mixture of the two lists.
The one area that ALL comparisons should possess is a consistent measurement. I have seen Risk Managers actually lose their jobs over a very high E-Mod even though the RM was not even on the job when the variables were set in place. After the RM was terminated, the E-Mod then decreased sharply. As I have posted often, Workers Comp is a heavily delayed-results system.
Whether we like it or not, the E-Mod or LDF is the “proof is in the pudding” measurement. It is the system in place. As Charles Givens wrote in Super Self, “If you want to win, you must play by their rules.”
I will cover the two lists in the next post. Workers Comp can be boring. I do not want to add even more to that boredom this evening.
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