Final Claim Reserves Set Earlier Than Expected
The final claim reserves are set much earlier than one might expect in the reserving process.
Most adjusters set the final reserves at 60 days into a claim. The exact timetable is:
- 14 days – initial reserve – usually made to the medical bills for first treatment and to start any indemnity benefits (if required). These reserves may not be accurate when examining a loss run
- 60 days- final claim reserves – regardless of claim severity the reserves are set “for the life of the claim.” The adjuster reviews the reserves every 30 days to make sure of adequacy to pay benefits, medical bills, and expenses. The 30-day reserve review can be very difficult to accomplish with the other 13 daily adjuster tasks. The claims supervisor usually has a diary at 50 days to analyze the reserves and ask the adjuster questions on the reserves. The review date for denied claims may be longer.
- 6 months – locked in reserves – any adjustment to the 60-day final claim reserves is analyzed at this point in the claims. At 6 months, the claims staff has sufficient knowledge of claim seriousness. The Claims Manager usually has a 6-month diary for any larger claims. For the very large claims, a diary for the Claims VP/Examiner may kick in at this point.
- Repetitive diary -(Every)
- 30 days for claims adjuster
- 60 – 90 days for claims supervisor
- 6 months for Claims VP or Examiner
- AdHoc – As needed – reserves are increased when:
- Reserves not sufficient to pay benefits or medical/expense bills
- Claim risk changes – usually an increase in severity
- Varied Timetable – not all insurance carrier and Third Party Administrator claim reserve timetables match the above exactly. The overall idea is to have the employers participate in the process. The final claim reserves should have input from the employer before setting them.
Employer Responsibilities With Final Claim Reserves
The employer responsibilities to keep claim reserves in check are:
- Establishing a business relationship with your adjusters – one of the quiet cost savers on claims. Adjusters who know their employer and vice-versa will always have lower reserves on those claims. Do not forget the critical medical only claims adjusters – another quiet cost saver.
- Information flow – make sure the claims staff has all the information you receive on the claim ASAP. Investigate the claim occurrence onsite if possible. The more great info an employer can provide the adjuster before the 60 days Final Claim Reserves, the better the outcome. Do not make the adjuster go into protection mode on the reserves.
- Avoid Twilight Zone phone calls from medical providers and the injured employee. These will result in tremendous reserves. Trust me on that one. I can remember those phone calls from the 1980’s.
- Make sure the adjuster knows (overall and on the specific claim) that you have followed my Six Keys To Cut Workers Comp Costs.
- Negotiate at policy renewal (if possible) a contact from the claims department is reserves are increased by X amount ($25,000 recommended). Many TPA’s have this built right into their systems.
- Online claims access – you can check the progression of the claim without having to contact the claims adjuster. Do this – it will pay off in the long run. A knowledgeable employer always has lower reserves.
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