Loss Runs Most Important Time To Have Them Updated

April 24, 2014 By JL Risk Management Consultants

Updated Claims Loss Runs Are Critical To Cost Savings

Your WC loss runs should be up to date at all times. Online access is key as carriers and TPA’s will usually allow ad-hoc reports for analyzing loss data.

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January 1 is the most popular renewal date for Workers Comp policierenees even though January 1 should be avoided for policy renewal dates.

Most policies with a January 1, 2015 renewal date have a very important date occurring in the near future. Generally, on June 30th at the close of business, the applicable Total Incurred figures will be pegged by NCCI or your state’s rating bureau.

In this case, June 30th, is the Unit Statistical reporting date. Your company’s E-Mod/X-Mod will usually be calculated in the next 90 – 120 days using the June 30th figures.

If your loss runs are not up-to-date, how will you know whether or not the Total Incurred figures are correct on your Workers Compensation files? If your company has a January 1st renewal date, you will usually have 67 days from today to negotiate any reserve figures with your insurance carrier.

As I have said often, do not just call up the claims department or your agent and say the reserves (Total Incurred – Paid) are too high. This will only negatively affect the working relationship you have established with your Workers Comp claims adjusters. You need to be specific.

The key is knowing which claims have truly been over-reserved. Selecting the proper claims to question may lower your next years’ E-Mod/X-Mod. Selecting the wrong ones can be costly.

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Loss Run Analysis – Second Step To Cutting Your WC Costs

February 20, 2014 By JL Risk Management Consultants

Loss Run Analysis Second Step To Cutting Workers Comp Costs

The Loss Run analysis is the 2nd step to cutting your WC costs.

The first step in cutting your WC costs is reading your Workers Comp policy.

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Online loss runs are the best method of cutting your WC costs from the claims end.

Even if you have a few accidents, online access will usually result in immediate loss runs that can be printed or downloaded into a spreadsheet.

If your carrier or TPA offers a method to download information, include everything possible in the download. The more information you have on a spreadsheet, the potential to save WC $ increases greatly.

If you are using Excel(r) as your spreadsheet provider, you may download many statistical packages from Microsoft free of charge. Most of the new Excel versions already have these loaded into the package.

I do not like to use the “red flag” terms when referring to loss runs. There are no actual red flags as the loss runs may not have enough information to add this moniker to any of the claims listed. The claim amounts that do not look right are the ones you should analyze further.

Without looking at the loss runs, there is really no generic statements that can aid you in your loss run analysis.

The one area that confuses many employers is the term Total Incurred. This may not necessarily be a column on your loss runs. There are so many versions of loss runs that you may see Total Incurred listed as:

Total Reserves Incurred
Total
Total Reserves
Incurred
Paid + Unpaid

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The main way to decipher this (before emailing your adjuster) is to find the highest number on the claim when referring to reserves, paid, and incurred. If the claim is still open, then the highest number will usually be the Total Incurred.

On closed claims, the total pad should equal the total incurred. Strange things sometimes show up on loss runs. If those numbers do not match on a closed claim, an inquiry email should be sent in most cases.

After checking out your closed claims, then you should move on to the open ones. This is where things may become sticky – so to speak. Claims professionals usually have to be trained very heavily and on the job for more than 5 years to be comfortable with reserving claims.

Reserving is an art more than a science. The adjuster has to forecast the life of a claim at 60 – 90 days after an accident. For instance, many years ago I was in a training class on WC reserving with 10 other adjusters.

Given the same information on three different claims, the instructor asked the adjusters to set the reserves on a claim. The reserves ran the gamut on the numbers. Everyone had different numbers on a minor claim, more serious claim, and then a very serious claim.

Online and sometimes paper-based loss runs will have a status on the claim. If the status does not look right to you, it is the responsibility of the employer to:

Update the status to the adjuster as you may be talking to the employee weekly if not more often
Provide the adjuster with all status updates, they should have everything that you have on the claim- concise information sharing is the key here.
Scan and email everything to your adjuster. Most carrier/TPA claims systems are set up where the adjuster can attach the documents to the claim for their later review. The more info the adjuster has on file, the more accurate the reserving.
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If you do not have a working relationship with your adjuster, then you definitely need to explore who is the adjuster on each of your claims. Communication with the adjuster from the employer is beyond critical.
Do not just email your agent your loss run and ask for assistance. There are a few agents which have hired adjusting staff to help clients. This is an extreme rarity.

Whenever we have questioned an adjuster on a file, we often hear from them that they did not know certain aspects on a file that could have been easily supplied by the employer.

The person setting the reserves that will heavily affect your E-Mod or LDF (self insureds) should always have the most information possible from all parties involved in the claim. The lack of information being provided to the adjuster can be very costly.

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Outlier Claims In Your Workers Comp Loss Runs – Savings Goldmine

March 13, 2013 By JL Risk Management Consultants

Workers Comp Loss Runs – Outlier Claims Skew Everything

Hunting the outlier claims s is the way to get the most “bang for your buck” in your loss runs. Workers Comp loss runs can be a gold mine of information. Finding gold can be tedious.

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Outlier claims are the ones that do not fit the norm. Outlier claims data are usually the easiest to spot by just examining the Total Incurred or Reserves in a loss run. The basic claim formula is Total Incurred = Paid + Reserves.

The amount paid on a claim can also be an outlier. For instance, a knee strain with no surgery has a $14,500 medical bill paid on the claim. The payment is an obvious outlier that deserves a quick investigation. These outliers are very easy to spot.

The reserves on a claim usually receive much more scrutiny. How can someone know whether the reserves are out of the ordinary? Reserving is more of an art than science. Reserves are the toughest outliers to spot as they are basically an opinion.

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Three Workers Comp adjusters can actually come up with three very different reserve levels for a specific claim. Each adjuster can have a very unique opinion on the same Workers Comp file. The varying opinions are why a reserving expert is best to analyze the reserves. Attempting to negotiate reserves without having a reserving background can sometimes backfire.

In most cases, the outlier will be an amount that exceeds a certain normal value. There are also outliers that are also lower than the norm. The low outliers can ruin a self insured or large deductible program. If an injured employee is preparing to have knee surgery, insufficient reserves can result in the employer not budgeting enough $$ for their claims outlays for the next few years. Which sleeping dogs does one let lie?

Most self insured companies have a Loss Development Factor (LDF). If your self insured company is not having one calculated, you may not be budgeting properly for your WC claims. The LDF that is based on anemically low reserves is just that – anemic.

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A reserve shortage on claims has caused many self insured employer groups to fail. Chronically low outlier reserves are a recipe for disaster. Surprise reserve increases usually cause a self insured group to have not assessed their members enough to cover the future payments.

The easiest way to find these high or low outliers is by downloading or converting the data into a spreadsheet. There are many statistical packages such as the Statistics Package in Excel. If your TPA or insurance carrier does not allow downloads of the claims data, you will unfortunately have to input it claim by claim. Having access to the reserve data online is priceless for your outlier hunt. This is especially true if your company has a large loss run.

The one reserve analysis technique to NOT use is to call your adjuster or agent and complain that your company is paying too much in premium and you need all the reserves lowered. This technique is never recommended at any time in claims analysis process.

Such banter with an adjuster can create a bad working relationship with your adjuster – the person with the finger on the button.

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Workers Comp Loss Runs – Ten Quick Ways To Analyze

October 17, 2012 By JL Risk Management Consultants

Ten Quick Ways – Review Workers Comp Loss Runs

Your workers comp loss runs are a very important step in reducing your company’s premiums or insurance budget, NCCI, WCIRB or any rating bureau uses the info that is provided to your company by your insurance carrier.

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Actuaries will use the same info to produce a Loss Development Factor (LDF) if you are self insured.

Even if your loss history or incident rate is not that great, you may be able to at least reduce some of the claims that figure into your E-Mod or X-Mod. This will also work if you are self insured on your LDF. The five quick ways to analyze the list of claims on your loss run are:

See if you have an option to access your loss runs and reserving history online. This will usually be provided if your company has access to your claims information. If you can get this downloaded into Excel, you have saved yourself possibly hours of inputting data into a spreadsheet.
Analyze only the claims that are open. Claims that are already closed will not benefit your company that much unless you think overpayments were made on the claim.
Input all open claims info or your loss run into a spreadsheet . That is why #1 is so important. You cannot do an analysis by hand.
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Make sure your claims spreadsheet has a place for a claims status. That can usually easily be found if you have online access. Some carriers/TPA’s will have this included on the paper loss runs.
Check for open claims that should be closed. This is the low hanging fruit theory at work. Use your spreadsheet to send the adjuster(s) an email asking why the claim is still open. Do not call the adjuster. Calls waste their time and leave you with scan documentation.
Email the adjuster to ask for a status (or updated status) if you do not have online access. The status on new claims will usually change every 30 days. The older claims statuses will change every 90 days.
Negotiate your reserves down. Remember that Paid + Reserves = Total Incurred. You are trying to reduce your reserves to decrease your Total Incurred. The Total Incurred is what is reported to the rating bureau.
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#7 can blow up your E-Mod or X-Mod if one is not careful. Knowing which claims to point out to which adjuster is an art in itself. If an adjuster needs to increase a file’s reserves and you try to negotiate the file reserves down, you may be reminding them to increase the file.
Pay attention to subrogation. If your carrier/TPA recovered funds from a 3rd party, are the amounts subtracted from your Total Incurred?
If any of these concern you (especially #7), it may be best to call in an expert to assist with your E-Mod reduction.

The worst thing to do is to file away your Workers Comp loss runs and do nothing. Any employer that is paying attention to their claims will almost always see a reduction in the near future.

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Loss Run Request – What and When Will I Receive It ?

May 18, 2010 By JL Risk Management Consultants

Term Of The Day – Loss Run

The loss run is a listing of all Workers Comp claims that a carrier or TPA provides to its insured. They can be ad-hoc (on demand), monthly, or quarterly. The virtual loss run is when the employer can access their claims data by signing into an online system.

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The loss runs usually include the injured employee’s identification data; the total paid, reserved, and total incurred. There may also be a short claims status from the adjuster on the report.

Online claims data is very critical to properly manage the Workers Comp claims. If you are not receiving these very important documents, call your agent immediately.

Online versions are the most effective methods to cut workers compensation costs. The employer will have access to up-to-date reserving, claim statuses, and notes from the claims staff. Almost 100% of questions by an employer can be answered through online loss runs.

I rarely recommend paying extra, but in this case online access may be worth the extra costs.

If the carrier provides them as printed or scanned and emailed, the data may be out of date by the time they are received by the employer. J&L heavily advocates online access for claim reserves and as a method to reduce premiums.

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Why Are Loss Runs Needed As Part Of Your Workers Comp Audits?

April 27, 2009 By JL Risk Management Consultants

Loss Runs – Important Part Of Claim and Premium Audits

We receive questions on loss runs often when we are obtaining the materials that we need to do the Workers Comp premium audits/reviews for employers. We also like to go more in-depth than the insurance company’s auditor.

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The reason that most premium audit companies ask for loss runs is to make sure that the loss runs provided by your carrier resulted in the exact same numbers on your E-Mod/X-Mod sheets.

In the past, there were errors made when the insurance carriers and rating bureaus transferred the claims loss numbers from the insurance company loss runs to the rating bureau Experience Modification sheets. The Unit Stat Report is what the insurance carriers report to NCCI or the State Rating Bureaus. This type of error is not as prevalent as in the past. However, it does happen. The largest recent one was the NCCI rating sheets for New Hampshire employers five to seven years ago.

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One of our services is to also review the claims loss runs to formulate a plan on how to reduce your claim reserves. It is very difficult for us to go back in time and try to negotiate down a Workers Compensation reserve figure. The reserving exists in the present only. If any company tells you that they can negotiate down PAST reserve figures, that should raise a few questions as no insurance carrier will allow a reduction in past reserves.

The best way to keep track of the reserving by the claims department is by having online access. As I have said before, the claims loss run is no different than any other type of financial statement and should be treated exactly the same as a bank statement. Please see the recent post on online access.

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Big Workers Comp Gamble From a Claims Loss Run

September 1, 2008 By JL Risk Management Consultants

Workers Comp Gamble On Your Insurance Premiums

Does Workers Comp gamble their insurance premiums?

A question from one of our blog readers – I received my Workers Comp policy run. How do I review the loss runs? If I find something that I disagree with on the loss runs, what do I do to get the mistake corrected?

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In going along with the blog title, this is an area where a few employers can actually do more harm than good. As I mentioned in a previous blog, there are a few things that cannot be accomplished in a claims review. Any monies spent and any reserves on old policies cannot be questioned, except for the reserves on the current policy + the 180 day window mentioned in one of my recent posts.

A Few Ways to COST your company premiums are:

Calling up the claims adjuster or supervisor and just saying “My reserves are too high, fix them” will fall on deaf ears.
Not all files need to be reviewed. In fact, reviewing certain files may COST more premiums than if the file was never reviewed.
The location of the file review, depending on the insurance company
The method of the file review
Who attends the file review
The preparation by the employer is very important. “Shooting from the hip” can be disastrous in a reserve review.

To keep these blogs from being too boring, I will cover some of the above bullets over the next week instead of going over all of them in this post.

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Corrected Loss Run – Will You Receive A Premium Refund?

May 2, 2008 By JL Risk Management Consultants

Refund on 2003 Corrected Loss Run – Possible?

A corrected loss run may not cause a 2003 policy year refund. You corrected a problem on your year 2003 Workers Comp claims loss run. Can you expect a refund of premiums?

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Under most circumstances, there would be no refund as it was too far into the past. In fact, the ONLY loss run that can be corrected is the most current one in most cases.

We have been asked very often to try to dispute an old loss run. Over 95% of the time, we are unable to assist due to the NCCI or State Rating Bureau rules. We cannot evaluate or fix a file that was seriously over-reserved on old Workers Comp loss runs.

How does your company or any employer keep from over-paying due to incorrect loss runs with mistakes such as over-reserving, claims from a different employer, double entry of the same claim, etc?

As I have posted in the past – please check my old posts – follow the files with online claims access, or obtain a Workers Comp loss run monthly or at least quarterly. Review and monitor the loss run like a financial statement. If you see something that looks odd, question it immediately.

The bottom line key is to be proactive as the claim develops over time. The Six Keys will always help with reducing reserves. One cannot expect an adjusting staff to lower the reserves after they have been long established over a few months.

The critical time for the workers’ comp claims adjuster to finalize reserves usually occurs at the 60-day mark after the claim was opened on the carrier’s or TPA’s system.

If you ever feel that you need assistance, please call in a Workers Comp claims loss run expert.

Up Next – A Controversial Workers Comp Definition

Loss Run Review Question From J&L Article Reader

February 10, 2008 By JL Risk Management Consultants

Loss Run Review Question From Reader

A Loss Run Review Question From One of our Blog Readers – In one of your earlier blogs, you said that Workers Comp monthly or quarterly loss runs are like gold to an employer.

What are the deadlines for reviewing them to try to reduce my premium?

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Our recommendation is that you set aside some time after receiving each monthly/quarterly loss run to review the claims.

One of the reasons that you must review them very often is one of my old work comp rules –

You cannot go back and change what has been paid on a Workers Comp file or change the reserve after the file has been closed. Workers Comp reserves are the “here and now” money that is going to affect your insurance budget for up to five years.

Workers Compensation premiums have a look-back period where we can go back into the past a few years, but we can do nothing with the reserves on a file that has already been handled and closed. There are some companies that will go back into the past and try to sue their Work Comp carrier, but that is usually a long, drawn-out process where everyone loses.

There are some prior posts that cover how to look at your loss run in this blog. You must start talking to your insurance carrier three months after your new policy just renewed. That does sound strange, please read this carefully. Do not start trying to review your reserves in November for a January 1 renewal date. You are months late and will not help your E-Mod or premiums.

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Feel free to email me at [email protected] if you wish to know when you need to start reviewing your reserves and when your reserves will affect your E-Mod and premiums.

Up Next – Another question from our blog readers.

Work Comp Loss Run Reviews – Getting Online Access Saves Time

December 17, 2007 By JL Risk Management Consultants

Workers Comp Loss Run – Online Is Best

Your work comp loss run reviews are beyond critical in cutting your workers comp costs. Obtain a copy of your current Workers Comp loss run for all claims less than 5 years old. If you have online access, that will help greatly. If not, check with your current and past carriers to see if you can access your claims online.

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Ask for access to all notes, reserve increases, status updates, documents, and adjuster action plans.

Having the adjuster’s name and email address will help if there are any questions. As I have mentioned often, use email to contact adjusters.

Calling the adjuster will mean they have to pull up the file and then review it and then call you back. I always contact the adjusters by email as this leaves them with an amount of flexibility they will appreciate.

Only use a phone call if there is emergency contact is required on the claim. You will be surprised at how quickly the adjuster returns your email.

Paper loss runs are OK to use for workers comp loss run review. You will usually find them out of date by the time they are received from the insurance carrier or TPA.

As I have often said, having online claims access is worth an additional 20% on premiums if you are comparing two different quotes from carriers.

2021 update – as loss runs and claims access is now more popular. the above 20% should be reduced to 10%. Most carriers and TPAs now offer free online claims access. If yours does not, then you should email your agent or carrier/TPA representative to find out why.

The main figures on the loss runs are Paid, Outstanding Reserve, and Total Incurred.

Total Incurred Figure on Workers Comp Loss Runs

The numbers that are reported to the Workers Comp Rating Bureaus – NCCI, WCIRB, etc.- comes from the Total Incurred figure. The formula is Total Incurred = Paid + Outstanding Reserves.

Self-insureds, your actuary will use the same figures to produce a Loss Development Factor or LDF. You do have an LDF calculated each year. LDF’s can be expensive, but worth it many times over.

Please do not think your company or organization is “outside the workers’ comp system” because you are self-insured.

Rule of 7’s(c)

If you have a massive amount of claims, such as in a large organization, you will want to use the claims review rule of 7’s(c) for the review of your claims. I coined and copyrighted that term as I adapted it from Charles Givens’s Rule of 7’s in his investment books.

In the massive claims reviews, we have performed, the rule of 7’s allows you to have a good idea of how your claims are being handled. Make sure that you use a random number generator to pick the claims you will review. You may find many of them online such as this one.

You can set the random number generators to generate random numbers any way you wish. Please make sure you have picked random claims, not every seventh one on the loss run. That is not randomness.

I have had long discussions with clients that wanted certain claims reviewed in a random claims audit. This may not bode well for another overlooked claim that should have been reviewed.

Why would you want randomness? – To make sure you did not center on certain claims, claims adjusters, or any other type of way the claims may have been organized.

Only use the rule of 7’s if your loss runs have 50 or more claims on it. You may wish to split medical-benefit only claims and lost time claims apart for the rule of 7’s review.

Workers Comp E-Mods and Loss Runs – Few Misconceptions

November 7, 2007 By JL Risk Management Consultants

Most Workers Comp E-Mods And Loss Runs Misconceptions

The Workers Comp E-Mods and Loss Runs misconceptions that we have seen are:

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Only the open claims make a difference on the E-Mod – any claims opened within certain policy periods affect the E-Mod no matter whether they are closed or open on your Workers Comp loss runs. (See the previous post on Experience Periods)
The claims for last year will affect the E-Mod – Your Experience Period does not include the claims from the last year. For example, if your policy is renewing on 1/1/08, then the claims for 1/1/04 – 12/31/06 will be counted, BUT NOT THE TOTAL INCURRED FIGURE FOR 12/31/06 or 12/31/07. See our previous posting on Total Incurred. The Unit Stat Date is critical.
I only need a loss run yearly – For better control of your Workers Comp Costs, you should have online access to your reserves and the ability to run a loss run on demand. Your insurance carrier should be supplying loss runs at least quarterly. Online access is the best way to look at loss runs. Check with your Work Comp insurance carrier’s IT department to see if you are allowed online access. Most carriers have the service available for free.
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Worst of ALL – I cannot control what reserves are on a claim – Communication with the Workers Comp adjuster will always help keep reserves at a reasonable amount. See our previous blog on the Six Ways to Cut Workers Comp Costs. Doing those five things and letting your adjuster know you are doing them will help greatly.
I cannot tell if the total incurred or reserves are out of line – If you feel you are in over your head, then consult with a reserving expert. We negotiate reserves with insurance companies and third party administrators daily.

Next Up – The Claim is Over in the First 48 Hours