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What is Earned But Not Reported (EBNR) – Employers Need to Know


Earned But Not Reported Now A Factor With Premium Audits – Employers Be Wary

NCCI’s Barry Lipton, Senior Actuary published a post this morning that I read over three times to absorb the theory of the Earned But Not Reported (EBNR) hangover effect.   You can check out the post here at this link.   You should at least read the introduction and conclusions.

graph of 2010 recession earned but not reported
CNN – Public Use License

I had to take Barry’s great article and take it from a macro view to a micro view.  How will this affect the individual policyholder?  Agents need to take heed of this info for their insured clients.

No, I am not beating up on premium auditors and premium audits.   I am beating up on the assumptions made after an employer receives a premium audit refund due to a downturn in their business.

Carriers are examining their figures due to the downturn.   Employers should also review their figures.

Yes, having a premium refund now has helped and will help employers survive until the main-street economy picks up speed – it already has picked up in certain areas and industries.

Earned But Not Reported (EBNR) Definition

From the NCCI article – at the previous link

… our subject today is about a related issue—the accuracy and timeliness of the financial estimates carriers are required to make for the premium these audits generate.

This financial estimate, known as Earned but Not Reported premium (EBNR), is the premium counterpart to the better-known Incurred but Not Reported component of loss reserves (IBNR). 

This is a macro level definition – hang in there with me – this is going to make sense.

Micro-level Definition of EBNR

Micro Earned But Not Reported Beads
Wikimedia Commons – Zach Dischner

Therefore, the written premium for that calendar period will look extra low since high-payroll estimates in the prior policy period are being corrected over and above the decline in actual insured policy payroll volume attributable to economic conditions—a double whammy, as two years of impacts are rolled into one. This affects both written and earned premium.

How Does Earned But Not Reported Affect An Employer?

NCCI did not make this conclusion, I am making it.   Let us say that your business spikes once a full recovery takes place.  Look at the second chart in the article.  You can see the spike there.

The resulting audit for the subsequent policy year should be a concern.   If at policy renewal, the recovery numbers – where you received the refund are used, then you are in for a sticker shock on the post-recovery policy period audit.

Many carriers, (I assisted a few) processed premium refunds earlier this year.  My earlier “employer beware” warning results from this very situation.

The carrier has returned a large amount of premium to your company.  Many states such as New Jersey and California ordered an immediate return of premium.

When your business returns and you return your employees to work or hire new ones, your payroll may be much larger than your policy anticipated.  Agents take heed so that you avoid an angry insured when the post-recovery premium audit occurs in 2021 or later.

Earlier Articles On Economic Slowdowns

Running Water Earned But Not Reported in Green Background
Wikimedia Commons – Eli.berckovitz

Many articles published in this blog over the years warned if you have a business contraction, your policy renewal should reflect the reduction in payroll and should not be delayed until at the yearly premium audit.

The article in the prior link is from 2008 and covers recession proofing your workers comp policies.  The article you are reading now should be looked at as recovery-proofing.

Now, the opposite may be true for your company, you may have received an early premium refund or have received one at the audit.   That is great news.  Make sure that your next policy reflects any anticipated business improvements.

Some businesses may not recover until late 2021 or 2022.   If you do not anticipate your business increasing until the second policy year, then remember to adjust the policy renewal figures in your recovery year.

Waiting Until Premium Audit To Offset EBNR

If you wish to conservatively estimate your business recovery, then avoid the Earned But Not Reported sticker shock at premium audit.   Budget funds to pay the affected premium audit when your business fully recovers – good luck.



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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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