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.
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).
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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