Workers Compensation Reserves – Lowering Them Can Be Difficult
The Workers Compensation reserves on a file naturally generate controversy. Why is there so much discussion on them? How can you have a great conversation with your claims adjusters?
A workers compensation claims adjuster’s daily activities include 12 more important tasks than lowering reserves. It is the nature of the system, not the individual adjuster’s fault.
If one contacts the adjuster to blame them for the reserves on the file, the claims adjuster is put in a defensive position. A good email to the adjuster (no phone calls) has always resulted in the adjuster emailing me back or calling me back to talk about the file and the current reserves on the file. Do not email the adjuster’s supervisor initially – only in extreme circumstances would that tactic seem appropriate.
Establishing Business Relationship To Monitor Workers Comp Reserves
If you do not know your claims adjusters names, please find that out quickly. After all, these are the persons that are putting up reserves on your file. A caveat comes from the sometimes heavy turnover in the industry.
One of the most common complaints we hear from employers and the claim staffs centers on the change of adjuster multiple times on a file. Regardless, keeping up with who is the adjuster on a certain file is critical. You may actually know more about the file than the adjuster that has been on a 5 year old file for two months.
Email communications are the best way to communicate with your adjuster. That way you and the adjuster both have an easy way to track the communications on the file even if you have to copy and paste them into a file. Trust me on this one. It will make your adjuster very happy.
Do not forget the ever critical medical only claims adjuster – they are putting up workers compensation reserves on your files even though the amounts may not be large. Check out these two articles on medical only claims – they can cost your company dearly if not monitored.
Let All The Adjusters Know Your Injury Reporting, Dr. Network and Return to Work Programs
Many claims adjusters will use the background of the insured as one of their reserving factors. In fact, it was the most important to me when I worked a claims desk. I still today advise on reserving to employers. If you do not have programs for the three areas mentioned in the previous heading, the reserves will be higher than the company that has them in place.
The Six Keys To Saving On Workers Comp claims cover other areas to reduce workers compensation reserves.
Data Access Will Help Reduce Your Workers Compensation Reserves
Online claims access remains a critical factor. I have mentioned this subject for over 10 years.. Receiving a paper loss run report quarterly or even monthly just will not do if you want to control your workers compensation reserves. You need to know your reserves up the minute, not from a three week old report.
Zombie Reserve Phone Call
I just coined that term thanks to coffee. A zombie reserve phone call starts with the claims adjuster receiving a call from the employer, agent, etc that consist of “the #$^$& reserves are too high. You are killing me. Bring them down. The adjusters reading this are shaking their heads up and down while smiling.
Adjusters are the most independent-minded people just behind oilmen and truck drivers. Receiving a call like that can only ruin the business relationship (see the first heading) that you have established with your claims adjusters. Do not do it. Just don’t. Your workers compensation reserves will thank you later.
BE A MASSIVE INFORMATION PROVIDER
The heading is in all caps as this is so important. Send in every piece of information that you can to the adjuster. Scanning and emailing is the best way. Everything is the motto here. The more information provided the lower the reserves on files. Once again, trust me on this one.
Do you have a designated person in your company for the adjuster to speak with concerning your Workers Compensation claims? See the first heading again – establishing a business relationship.
Avoid the rumor mill on this one. Do not email the adjuster that the someone heard that someone heard the employee was mowing their lawn. Now, if they hear that the injured employee works at another employer while being out on workers compensation benefits, that needs to be reported to the adjuster ASAP.
Understanding The Workers Compensation Reserve Authority Levels
Bill Zachary recently wrote an article on how reserve levels can cause delays. He was correct in the article to say that claims adjusters may not have the proper authority level even at meditations to settle a file.
The other side of the coin is that large reserves pass through many hands/desks. The adjuster alone may not have been responsible for the reserve level on the file. Excoriating them on a very high reserve may not be the best tactic. Below are synthetic reserve levels in a claims department:
- Medical Only Adjuster – $2,500
- Adjuster trainee – $10,000
- Adjuster – $25,000 to $40,000
- Senior Adjuster – $40,000 to $ 60,000
- Supervisor – $50,000 to $80,000
- Manager – $75,000 to $135,000
- Vice President/Examiner -Unlimited
- Big meeting with all parties – Mega-claims
In those numbers exists one big key. When mega-reserves are sitting on a claim and they need to be reduced, the same people have to approve the lessening of reserves. Motivating the adjuster who has very limited time on their hands to spend hours on a reserve reduction through the levels of authority takes a special willingness to lightly push the adjuster along. Many adjusters want to close out any excess reserves at the file closing. This delay may cause an Experience Mod to stay high.
I had a claims VP tell me approximately five years ago that my client’s reserves were too high, but he was not going to reduce them. Every party up to his level agreed the reserves should be reduced – the file has $540,000 in reserves at the time. It closed within $10,000 of my recommended $145,754 reserve recommendation. The bottom line – the adjuster may not be the one responsible for the reserves. Do not ruin your relationship with them. Once again, see subheading #1.
Why Should You Care?
Voluntary Market Insureds
The key for employers with a regular workers compensation insurance policy is the E-Mod (sometimes call X-Mod). The mechanics of the E-Mod calculation will not be covered here. There are many articles already written on the subject in this website.
Keeping up with your claims and paying attention to the loss adjusting will usually lower your workers compensation reserves. Some companies consider workers comp as just a tax of doing business, which can be a large mistake.
One caveat here is to think that only the last four years of claims go into the E-Mod, so the old claims do not make any difference. That thought causes many companies to not be able to find lower cost policies. Carriers examine ALL claims now as far back as a company’s loss history can be traced.
Data analytics are here to stay. All claims now count. I have examined many analytic reports. Most of them left me asking even more questions. Many data analytic software packages now look at 10 years of claim data at a minimum.
Self Insureds And Other Similar Programs
Self insureds, very large deductibles, most captives, and alternative risk programs fit into this category. As posted very often in these articles, I have heard self insureds say ” We are outside of the Workers Compensation system.”
Actually, self insureds and other similar programs are more in the workers compensation system than another group. The voluntary market insureds have a buffer of the E-Mod. If they have a $540,000 loss, there premiums are not going to increase by that amount. If you are a self insured, then it comes directly from your budget – write the check.
Self insured must work very closely with their TPA to make sure that the reserves are appropriate. Under-reserving can cause a budget shortfall. Over-reserving can cause the budget to be too inflated. Either situation can wreak havoc on an insurance budget.
Notice No Technical Advice
Why was there no technical advice given in this article? Many times we are called into a situation where the insured employer has caused an increase in their reserves, not a reduction after reviewing their losses and workers compensation reserves with the claims staff.
How can this happen? Sometimes a reserve review can serve as a reminder to an adjuster to recommend a reserve increase on a certain file. Knowing which files to address is critical.
To avoid the situation – unless you have a claims background of seven to ten years, use the alternative- this mini guide to help lower your workers compensation reserves.
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