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Workers Comp Mega Claims – My Different Definition

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Workers Comp Mega Claims From A Claims Standpoint 

A meeting notice caused me to write this article on Workers Comp mega claims.  If you have not signed up for the webinar and you have anything to do with workers’ compensation, please go here and sign up.  Yes, I registered earlier this week. 

workers comp mega claims 250000 banknote
Public Domain

Attending the webinar will be worth your time (trust me).  Multiple workers comp rating bureaus rarely work on the same statistical study.   The 39-page report can be found here. (PDF file).   The conclusions can be found on Page 23.   You can tell the actuaries have been busy when the Appendices cover 16 pages. 

The rating bureaus that contributed to the report and webinar are:

  • California’s WCIRB
  • Indiana Compensation Rating Bureau
  • Minnesota Workers Comp Insurance Association
  • New Jersey Compensation Rating and Inspection Bureau
  • North Carolina Rate Bureau
  • Delaware Compensation or Rating Bureau
  • Compensation Advisory Organization of Michigan
  • NCCI
  • New York Compensation Insurance Rating Bureau
  • Pennsylvania Compensation Rating Bureau

Differing Definitions of Workers Comp Mega Claims

Magyar Visla Male dog workers comp mega claims in the forest
Wikimedia Commons – Markgraf1508

In my little corner of the workers’ compensation world, any claim that has over a $250,000 Total Incurred represents a mega claim.  According to the above report, a claim that reaches $3,000,000 in incurred benefits becomes a mega claim.   The rating bureaus Total Incurred,  and your loss runs Total Incurred usually represent two different figures.   Check here for the difference.  

Most of the claim departments refer to these claims as “old dogs.”  A claim value does not reach $3,000,000 that quickly.  This sounds like quite a definition discrepancy.  That assumption would be correct.   

Why Only $250,000 For A Mega Claim? 

The $250,000 incurred level usually causes certain requirements from the claims adjusting staff.   Some of them are:

  • The reserves have now reached the Vice President level – more reporting required than just internal file notes and documentation. 
  • The reinsurance or excess insurance companies now need reports – usually on a prescribed form and some of the claims department internal documentation.  Their funds are now at risk. 
  •  The claim or set of claims are now subject to a possible audit by the reinsurer. 
  • Some states require reports after a claim reaches a certain incurred level 
  • The insured employer or TPA client now needs more formal reports 
  • The agent and underwriting department may require reports 
  • The claims diary system may be shortened -more supervisory and managerial reviews 
  • Subrogation must be followed – if you look at the above PDF report,  a large % of workers comp mega claims are vehicular accidents
  • Litigation reports must be generated as most of the mega claim claimants are represented by an attorney. 

All the above bullet points generate diary items for the life of the claim.  The requirements are not “one-off” reports – usually due every 90 days. 

What Causes Mega Claims?

Venice beach workers comp mega claims hit and run
Wikimedia Commons – WiLPrZ

I reviewed a claim this week that involved a hit-and-run auto accident where the Total Incurred sits at almost $1 million.  The claim is five years old.   The largest claims I have seen are:

The injured workers often required multiple surgeries which drove the medical costs to much higher incurred levels very quickly.   

The likely minimum amount for a workers comp mega claim should be adjusted up in the near future.  The $250,000 level has been in place for many years.    

 

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt 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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