Self Insureds – Do You Know If Your Excess Insurer Has Been Notified?

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Self Insureds Need To Monitor Excess or Reinsurer Notification

Do you know if your self insureds has been notified? Workers Compensation excess insurance (reinsurance) can often go unnoticed in all the inner workings as a file progresses towards its conclusion.   A reinsurer denying coverage because they were never put on notice is very rare for Workers Comp.

House of fire Self Insureds insurance association
Wikimedia Commons – Laima Gūtmane

A recent article where the underlying insurer sued their excess insurer pointed out the “rock and a hard place” the excess insurer is placed in when it has no knowledge of a claim that may require payment.   Most liability insurers are very careful when it comes to reporting  claims that may reach above the primary insurance level.

For instance,  an example of where a self insured employer may end up paying out of pocket:

  • Employee has serious injury
  • Total Incurred (Reserves + Paid) is set at $295,000.
  • Small paid amount = $17,400
  • Reserves are above the reinsurance reporting threshold of $200,000
  • Overloaded TPA claims adjuster and supervisor do not report claim to reinsurer
  •  Three years later, settlement is recommended that will cause the total claims payout to exceed $300,000.
  • TPA decides to report to reinsurer at this late date
  • Reinsurer is not happy as they were not involved in negotiating the settlement
  • Reinsurer should have had an initial status from the TPA three years ago when the Total Incurred exceeded $200,000
Picture of Self Insureds man empty pocket and dollar sign
123RF

Which party has the ultimate responsibility?   The responsibility is with the employer.    Of course, the employer could pursue the TPA.

How does a self insured employer avoid this situation?   The avoidance mechanism should already be in place.  When the TPA contract was agreed upon, were there reserve levels that should have the employer’s  approval before the increase by the TPA?

Self insured employers will often remark that the “reserves are not that important” as we do not pay premiums.  That may be true, but Workers Comp reserves can also be used as an alert when they reach certain levels – one of them being the reinsurance reporting level.

There are some TPA computer systems that will automatically report a claim to the reinsurer when the reserves reach a certain level.   The reinsurer will usually ask for a full report once the TPA system flags a certain claim.

Reinsurers have become more analytical and not just an insurance commodity.   Denials of coverage by the excess insurers may become more commonplace.

©J&L Risk Management Inc Copyright Notice

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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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