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Workers Compensation Reserve Increases – 10 Reasons For Huge Ones


Workers  Compensation Reserve Increases

10 Ways To Cause Huge Reserves

Most Workers Compensation reserve increases can be controlled by employers.   Let us see how employers cause huge ones below.  Some of these come from the Six Keys To Saving On Workers Comp insurance that I wrote in the 1980’s.

The list also applies to large deductibles, captives, self insureds and so forth.

Law of Large Numbers Workers Compensation Reserve Increases Graph
Public Use License – Dean P Foster

Top 10 Ways To Cause Jumbo Workers Compensation Reserve Increases

  1. Filing the 1st Report of Injury late – you have introduced your company to the adjuster as a high-risk company.   Large lag times make employers look irresponsible.   A high-risk company receives high-risk reserves.   This is an easy one to correct.   Many carriers have online reporting to cut the mailing times to a minimum.
  2. Not having an industrial-minded medical network in place – this one is even worse than late 1st reports.   Your workers comp adjuster has to deal with the medical providers very often during a claim.   If the medical providers seem high risk, the adjuster sees your company as high-risk.  This one takes some effort to establish.   Even in states where the employee has full choice of providers, they will likely go to the physician that your company recommends  80% of the time.
  3. A shoddy or no return to work program – this one can turn a regular claim into a permanent total claim very quickly. Many industrial commissions and all adjuster take notice when an injured employee cannot be returned to modified duty.   The days of firing the injured employee (in most cases) are long gone.   Once again, your organization sticks out as a high-risk employer.  The adjuster may set or add in reserves that equate to a high-risk employer.
  4. Employee treated like they are no longer part of the company –  this is one area that will almost always result in attorney representation.  If the employee feels like everyone is against them, they will find someone that will be glad to represent their interests for a price.   This one is very easy to fix.  An employer’s internal controls should facilitate how the employee is treated by the company.   Remember, as in #2 above, the adjuster has to deal with your choices on the claim.   The  wrong choices can result in large reserve increases initially.
  5. Not taking #1 – #4 seriously –  an employer may write a large manual on controlling Workers Compensation.    I have dusted those off many times when consulting with employers.  The manual was great but unused in those situations.   #1 – #4 above is multiplicative or additive when an adjuster starts to establish the reserves.  In fact, many reserve worksheets have checklists for #1 – #4 right on the reserving sheets.
  6. Twilight Zone (c) Phone Calls this one goes hand-in-hand with #1 above.  If the first introduction to a workers compensation claim is a call from an unknown medical provider on an unknown claim, the employer just put the red flag on the file as a high-high risk employer.  Check out the link for a better description of those types of those phone calls.
  7. Not Knowing Your Adjuster’s Names – If you do not know who is working on your claims, then that should be an internal red flag that your company is not working with your claims adjusters.   Establishing a working relationship (by email) reduces your company’s perceived risk factor with the adjusters.   Quite a few employers have us track their claims for them.  The first thing I do is send the adjuster a nice – hey let’s work together email.
  8. Not Knowing Your E-Mod, LDF, or Total Claim Payments –  this comes from my 5-minute company safety analysis article.  All senior management, business owners, safety officers, risk managers, or company claims administrators should know this number cold without having to look it up.   If you do not know the number, how can you tell how your company is doing with #1-#7 above?  This is similar to your location finder on your smartphone.   The maps function will not work if you do not know where you are presently.
  9. Not Having Your Loss Run At Your Fingertips – this one is the same as #8, but on a larger scale.   If you do not know your losses, you just shut off the location finder on your smartphone.   Online claims access should be viewed as beyond critical, especially near your Unit Statistical Date.  How can you talk with your adjuster when you have outdated data?   Emailing (not calling) your claims adjusters with old data does not look good.
  10. Like it or not appearances and first impressions count –  For instance, I am sitting here now with a large claim on my desk that I have been asked to assess the proper reserves.   What do you think I noticed in the file review – yes, these things work the same for workers compensation reserve increases as for an after-the-fact-analyses.

Many more reasons do exist to have a large workers compensation reserve increase or have the initial reserves set very high.  Feel free to add more in the comments section.

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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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