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Self Insureds – Stop This Costly Hidden Workers Comp Mistake

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Self Insureds Need To Consider Their Reinsurance Purchase

One of the most costly mistakes with Workers Comp self insureds is not putting enough effort into searching for and securing reinsurance, also known as excess insurance.   Self Insureds letting the Third Party Administrator (TPA) shop and choose the reinsurance may not be the most economical to purchase this coverage.

Man pursching bread Self Insureds in bakery shop
Wikimedia Commons – Marjory Collins

Reinsurance is basically where the self insured employer secures coverage from a carrier in case of many claims (aggregate) or in case a prescribed amount has been spent on a certain claim.  The aggregate is usually a figure such as $5 million.  The per claim limit is usually $250,000 of retained risk by the employer.   The $5 million and the $250,000 limits are known as retention levels.  The employer retains all of the risk up to those figures.

Even worse than allowing their TPA to choose the reinsurance carrier is not monitoring the loss runs to make sure that claims are reported timely to the reinsurer.   Nothing will set off the alarms at a reinsurer more than when a TPA has not reported a claim with reserves (not paid) over $250,000.

Even if the contract with the TPA stipulates that the TPA’s claims department is responsible for reporting to the reinsurer, the employer has the final responsibility.  This may be a good subject to bring up in meetings with the TPA or when authority is asked to increase the reserves beyond $250,000.

One area that TPA’s sometimes seem to slip is not the original reporting of exceeding the retention level.  It is the follow-up status reports that must be filed with the reinsurer.

Picture White Eraser Sketchbook Self Insureds Mistake
(c) stockunlimited

If you are self insured and do not have a copy of your reinsurance contract for Workers Comp, now may be a great time to request it.  Read over it very carefully.

One of the recourses that reinsurers will use is the outright denial of coverage due to reporting issues.  You may be surprised to find reasons that will have your reinsurance claim denied right in the policy.

Why am I writing this article?  We have an employer that has asked us to review the denial of reinsurance by the reinsurer for faulty reporting.   The TPA contract says the employer has the ultimate responsibility for reporting the claim to the reinsurer.   The reinsurance contract was made with the employer.  The employer may have to pay out even more funds after paying for reinsurance they may never get to use.   This is going to be messy.

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Reinsurance/Excess Insurance Market Hardens

Reinsurance Market No Longer Soft The reinsurance/excess Insurance Market has started to change from a commodity marketplace.  The excess insurance market is usually the bellwether

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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