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Workers Compensation Reserves – How Does Adjuster Set Them?


Workers Compensation Reserves – The Illusive Moving Target

All Workers Compensation reserves have a common element.   Very few, if any, employers, actuaries, underwriters, agents, and any other players in this hybrid insurance understand how reserves are set – other than the adjusters themselves.

einstein workers compensation reserves theory
Public Use License Wikimedia

By the way, that is a graphical representation of E=MC(2) Some workers compensation adjusters do document their reserving well.  With the sterileness of algorithms, workers compensation reserves machined out by a chip are becoming more common.  In fact, sometimes the adjuster CANNOT even override them without supervisory or managerial approval?

What is the basic minimum for an adjuster to have the knowledge to set proper reserves?  The mark rests at 5 – 7 years of experience.   Why?   The adjusters by then have seen enough instances of each type of claim to have a solid background in being able to set the reserves.

Most claims staffs have a spreadsheet type reserving system which allows the adjuster to input the indemnity, medical, and allocated expense reserves that post to the file.  Even if the claims staff uses advanced software, a spreadsheet still produces the workers compensation reserves .

One of the conundrums is the reserves for the lifetime of the file are usually set at a 60 day interval – with no adjustment to those for many months or years, or until the file closes.

If you are reading this article and are not the claims adjuster on a file or a certain set of files, you may want to set up a diary that enables you to analyze the reserves every 60 – 90 days.   A precious commodity that allows you to access the reserves in real-time (over-used word) becomes critical to following the reserves of the file.

You do not have to email the adjuster every time your diary date comes up.  Analyzing the reserves should be the key.   If the claims staff does not know who you are, then you should email your adjusters just to establish communications.   Many large organizations have such a manual requiring the adjusters to contact the respective insureds.

Notice how I bolded establish communications.  One of the keys to proper reserves is a line of communication between the insured and their adjuster(s).

Medical Doctor Doing Report Workers Compensation Reserves From Injured Woman
Public Domain By Paul D. Honnick

If you need to pull the loss runs (without real-time access to reserves or claims then that cycle becomes a delayed system.  As I noted over 10 years ago, online access may be worth 20% more on paying premiums or paying a TPA to process the claims.  That number remains accurate today.

So, now we know the 60 day time for the claims staff to set reserves.   Your claims diary should be clocked at 50 days to contact the adjuster or claims staff to give them any critical updates such as:

  • Return to work status
  • Medical notes you may have received
  • Your contact with the injured employee
  • Subrogation – Were there any other parties involved in the accident  – police reports for auto accidents, etc.
  • Any complaints or concerns from the injured employee about the claim – a big claim can result from the most minute concerns

The adjuster will usually have 50 – 100 different blanks to fill in on the proverbial reserving spreadsheet.  If many positive and communicated developments occur early in the claim, your workers compensation reserves may be lower than a company or organization that does not communicate with their adjusters <<by email.

Workers compensation reserves and adjusting remain a team effort for successful companies.

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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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