Workers Comp Reserve Schedule – Questions Answered On When To Review
In last week’s newsletter, I included an old viral classic article link on when to start on your Workers Comp reserve schedule to review your loss runs and discuss your company’s reserves with the claims staff. I received a few questions on the timetable for starting a review. Let us look at why you must start nine months before your next policy renewal at the latest.
Do You Use The Same Schedule for Self-Insureds and Regular Voluntary Market Policies?
Answer – Yes and No. I have written often concerning the difference between workers comp in the two different worlds of self-insureds and voluntary market policies. However, for today’s purpose, let us use the same schedule for example purposes. For self-insureds, actuaries use Loss Development Factors (LDFs) which are similar to Experience Modification Factors for regular voluntary market policies.
Large deductible policies should follow the same schedule as the regular voluntary market policies. Your Experience Mod is reported to the rating bureaus on the same time schedule.
So Many Articles on Your Website Keep Saying That Workers Comp Looks Backwards, But Why Are You Referring To The Future?
It is the UNIT STAT date when your insurance carrier tallies your Total Incurred and reports those figures to the rating bureaus that lead to the eventual calculation and publishing of your Experience Modification Factor. That date is exactly 180 days or six months after your policy expires to give time for full claims development figures to develop.
You can look at it as 90 days after your policy expires or 9 months before your next policy. The next question will answer why waiting until the last minute will not work to reduce your reserves. Check out this article on why reviewing your reserves with the claims department just before policy expiration is almost a complete waste of time. The only saving grace here is that you are reviewing the reserves six months before your UNIT STAT date. So much can change in six months’ time. Three months before the UNIT STAT date is the deadline to start on your company’s workers comp reserve schedule.
Why Can’t We Wait Until 30 Days Before the UNIT STAT Date to Review The Claim Reserves? We Are Too Busy To Keep A Workers Comp Reserve Schedule
The simple answer is getting a claims department to lower reserves on a rush basis goes over like a lead balloon with any claims staff. Think of a claim as a paper file, even though that is a rarity nowadays. This article on reserve authority shows why a paper file has to cross many desks before any reserve reductions. For instance, a file with a $300,000 reserve level has to go through the adjuster, supervisor, manager, and then the VP of Claims.
That process alone may take up to 45 – 60 days at a minimum. On top of that time, your company will need to review the claims loss run and the online file if you have access. A workers comp reserve schedule should be part of your risk management diary system.
What Is The Number One Wrong Thing To Do In This Process?
I have mentioned this many times on this website. DO NOT just call up the adjuster or supervisor and complain that “These reserves are too damned high” with no justification on which files should have the reserves reduced.
Think of the workers’ comp claims process as a team effort between the adjusting staff and your company. I have had this happen to me in my claims career many times. Agents and Risk Managers would call or email without any justification and be upset that the claims department could not just cut 15- 20% or more on the total reserves. An ongoing team approach makes this much easier in the long run. Being confrontational will not reduce the reserves. I guarantee it.
A well-placed and well-timed email may work if your company has followed the reserves and the claim since day one. The Six Keys that I wrote 35 years ago will also help your reserves – especially with a well-established industrial medical treatment network.
Do not have the claims staff look like the person in this picture as part of your workers comp reserve review schedule.