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Why Workers Comp Insurance Carriers Wait Six Months To Report Claims

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Workers Comp Insurance Carriers And The Reporting Cycle

Why Do Workers Comp Insurance carriers take so damned long to report claims to the rating bureaus (NCCI, WCIRB)?  Are they lazy? Can they not get their act together?  We have a loss run sitting right in front of us two weeks after the end of the policy.   The numbers are there – what the hell are they doing?

pic workers comp insurance carrier cycle

We receive these questions often from new or prospective clients.  Even self-insureds have this question when they work with their actuary to produce a Loss Development Factor (LDF).

The Frustrating Reporting Cycle

Workers Comp insurance carriers follow somewhat strict guidelines on reporting from their respective rating bureaus.  Most actuaries operate in the same time frame.   Workers Comp claim values are operated on a retrospective basis.

Workers Comp Insurance Carriers and Claims Development

Patience becomes a virtue as the cycle has confounded and frustrated many employers large and small over the years.   The term used that used to make my head spin many years back is claims development.

Claims development is the process of letting claims “ripen on the vine” for an extra six months.  This allows workers comp insurance carriers time to properly reserve the claims.

I had a reporter ask me do I think the system is fair? My answer was – it’s the system in place. 

End Of Policy Claims

If a policy that ends on 12/31 incurs a claim on 12/30, the workers comp claims adjuster would only have one business day to set the reserves.   In this case, the dreaded six-month wait would be needed as the reserves may be too high at the beginning of the claim until the claims adjuster figures out the proper reserves.

Usually, the claims adjuster sets the final reserves on a file at 60 days.   With our example claim that is in late February.  During this 60-day timeframe, the reserves can be adjusted up or down many times as the facts of the claim are documented in the file.

Self-Insureds Gripe About Actuaries

The same thing happens in the world of self-insurance.  The self-insured employer becomes very impatient when the actuary says that the claims should be used six months after policy expiry.   The same system of claims development workers as with the workers comp insurance carriers.

I have been asked to forecast Mods and LDFs before a policy ends.  I can do that task, but with a very heavy caveat that (like the weather) an earlier forecast may not provide the desired accuracy.

One Fix That Works When Dealing With Actuaries and Workers Comp Insurance Carriers

The employer in the first paragraph asked (as many do)- then what can we do to control our costs?  The one fix controlled by insureds and self-insureds is the claims loss run review and analysis.   Check out this article on how to start and sustain the review process.  Online access to the claims is golden.

A claims loss run review usually pays off great dividends.  There are many articles on loss run reviews on this website.  Please feel free to search using the search box on any page.

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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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