Definitions are a list of commonly used and rarely used but confusing workers’ compensation terms. These definitions include our former Terms of the Day from 2010 – 2012. All definitions were written by James J Moore – Founder.
Some of the terms may appear in other articles that are placed in other categories. The definition articles now total 131. One could have placed almost all the website’s terms into this category.
One can find any of the definitions by typing the term into the search box on any page of the website. If you do not find the term using the search box, please let us know and we will add the definition and email you a copy of the article once we have added it to the website.
The basic worker’s comp terms that one needs to know as a foundation consists of four areas – claims, rating, agency, premium audit, and underwriting.
This blog focuses on claims, rating, and premium audits. As we do not sell insurance, we do not focus on agency except in very general terms.
Understanding the basics of workers’ compensation will aid you in cost savings. Premium reduction strategies are at the core of all the 1800+ articles that have been written since 2007.
If any one subject interests you, please feel free to contact our founder at [email protected] or by using the Contact Us form.
We are adding at least two articles per week to this website. If you are reading an article, check for the links to other articles. Many times, we will link to the definitions to better explain the subject matter in the article.
ChatGPT Workers Comp Minimum Disability Rates Question I decided to try to stump AI again this week by asking the ChatGPT Workers Comp minimum disability
LCF Designation Question – Workers Comp Policy We have received this question in the last month from two risk management consultants. What does the LCF
Accountable Care Organizations (ACO) The accountable care organizations (ACO) are healthcare organizations characterized by a payment and care delivery model that seeks to tie provider reimbursements to
Term Of The Day – Wage Statement A wage statement is a necessary yet tedious part of paying a WC claim properly. The injured employee’s compensation
Term Of The Day – Minimum Compensation Rate Most states have a minimum threshold of Workers Comp benefits regardless of their wage rate. If the injured
Term Of The Day – Manuscript Policy A Manuscript Policy is an individually designed policy. It is negotiated by the insurer and the insured and is
Term Of The Day – Average Value Method Average Value Method has a requirement for estimates of loss reserves that are made on an aggregate basis for
Term Of The Day – Administrative Law Judge An Administrative Law Judge is a legal representative employed by the Workers’ Compensation Board. This representative reviews appealed
Term Of The Day – Maximum Medical Improvement In most cases, Maximum Medical Improvement (MMI) is assigned by a treating physician when an injured employee’s condition
Term Of The Day – Benefit Review Conference Various states offer Benefit Review Conference in order to help resolve issues and disputes resulting from on-the-job injuries.
Declaration Of Readiness To Proceed -California Work Comp Form The Declaration Of Readiness to Proceed resolves disputes in California. Another of the forms required in
Term Of The Day – Application For Adjudication Of Claim The Application for Adjudication Of Claim is the primary Workers Comp appeal form in California. This
Residual Market – Critical Under The Radar Coverage In insurance industry they need residual market for Workers Comp.Companies or industries that are considered high risk
Term Of The Day – Assumption Of Risk The Assumption of Risk term creates a lessening of liability in certain situations.. Workers Compensation usually does
Plain Language Laws Is a Misnomer Term The Plain language laws have failed at making insurance policies readable.Many insureds, including Workers Comp, complain vehemently that
Term Of The Day – Vocational Rehabilitation Vocational rehabilitation can include a plethora of services that are offered to injured employees to help them return to
Term Of The Day – Ultimate Loss The ultimate loss contains two basic definitions. In reinsurance, the unit of loss to which the reinsurance applies, as
Term Of The Day – Aggregate Excess Insurance This type of insurance is critical for Workers Comp self insureds. Even if a self insured has no
Term Of The Day – Cumulative Trauma An injury diagnosed by a physician as occurring without bodily injury being the direct cause of loss. Cumulative Trauma
Term Of The Day – Utilization Management The Utilization Management on a workers comp claim tends to save funds. However, as in California, the cost may
Term Of The Day – Planned Retention This is a risk financing term that refers to retention of losses by an organization or business as
Term Of The Day – Experience Account Experience Account refers to a provision in an insurance or reinsurance contract that, using some function of such policy
Payout Profile – Term Of The Day The payout profile or LDF are important to a company’s return on investment. This is becoming very important
Term Of The Day – Strategic Risk Management Strategic Risk Management (SRM) is the identification, assessment, and management of risk in an organization’s business strategy. When
Term Of The Day – Claims Made And Reported Policy A Claims Made and Reported policy has many similarities to a Workers Comp policy.
Expected Losses – What Are They and Where To Find Them? The Expected Losses for an employer is the amount of loss an average firm
Term Of The Day – Pure Captive A pure captive is the most basic of all captive arrangements. In the case of a “pure” or “single
Partial Retention And Deductible Comparison Partial retention is a very common risk management strategy. In Workers Compensation, partial retention is usually attained by using one
Term Of The Day – Other States Coverage Workers Compensation insurance can be very tricky when it comes to other or all states coverage. Many employers
Term Of The Day – Cell Captive A cell captive is either a rent-a-captive or a sponsored cell captive. The main goal is to lower risk
Term Of The Day – Aggregate Stop Loss Reinsurance The aggregate stop loss reinsurance is a type of reinsurance is becoming very rare and expensive. A
Term Of The Day – Insurer Sponsored Agency Captive These types of captives are sponsored by very large insurance carriers. They are almost a hybrid
Term Of The Day – Residual Market (RML) One of the reasons that alternative Workers Comp insurance is becoming so popular over the last few
Term Of The Day – Onshore Captive The onshore captive are a viable alternative to offshore captives such as Bermuda. The oldest and largest onshore
Term Of The Day – Certificate of Compliance The certificate of compliance is important doc.A certificate which authorizes that a company is in compliance with
Term Of The Day – Broad Form Hold Harmless Clause This is the most dangerous of the three types of Hold Harmless agreements. Broad form
Unfunded Self Insurance Is High Risk Unfunded Self Insurance can lead to a company actually folding if there are enough claims that were never placed
Workers Comp Catastrophe Cover = Massive Losses Workers Comp catastrophe cover deals with massive losses. Self Insured Employers may sometimes use a highly recommend risk
Term Of The Day – Ambulatory The definition of ambulatory care is any medical care delivered on an outpatient basis. Increasing numbers of medical conditions
Term Of The Day – Operational Risk Management A continual cyclic process which includes risk assessment, risk decision making, and implementation of risk controls, which results
Term Of The Day – Vis Major Vis Major means act of God or an unavoidable accident or calamity. Almost all insurance policies have a Vis
Term Of The Day – Retention 1) Assumption of risk of loss by deductibles, noninsurance, or self-insurance. Retention can be unintentional when exposures are not
Term Of The Day – Personal Risk Management Personal Risk management focuses on how individuals can protect their wealth by risk management. The two areas
Term Of The Day – BCAR BCAR = Adjusted Surplus / Net Required Capital AM Best invented this term. It is a test of the
Term Of The Day – Reinsurance Pool Pooling risks from across a certain population can minimize premium variances between groups and premium fluctuations per group.
Term Of The Day – Personnel Risk Refers to risks to a company’s operations that either concern or are caused by personnel. Personnel risk includes:
Retrospective Rating Requires Great Work Comp Risk Management A retrospective rating is an individual risk rating plan that is an optional plan. Both the employer
Term Of the Day – Terrorism Risk Insurance Act A Terrorism Risk Insurance Act of Worker Comp.Federal law signed into law by President Bush in
IBNR – Incurred But Not Reported Is An Estimate (Incurred But Not Reported) IBNR confused many in the WC community. When a policy of insurance
Term Of the Day – Reinsurance Aggregate (a) The dollar amount of reinsurance coverage during one specified period, usually a year, for all reinsurance losses
Term Of The Day – Annual Aggregate Deductible A collective type of deductible that can be used as a great risk management tool. The annual
Term Of The Day – Records Retention The length of time that closed Workers Compensation claims file material should be retained by the insurance carrier,
Term Of The Day – Earned Surplus Earned surplus for Workers Compensation insurance carriers, mutuals, captives, self-insureds, risk retention groups and captives, comes from the
Term Of The Day – Acquisition Costs Workers Comp policy acquisition costs (in most states) are broken down into four areas: Agent Commissions Premium tax
Term Of The Day – Stop Loss Reinsurance Protects a cedent against an aggregate amount of claims over a period, in excess of a specified
Test Mods Are Difficult Due To Correct Inputs Required We often calculate Test Mods for employers of all types so that they can properly budget
Certified Risk Manager Term Of The Day The CRM program is sponsored by the National Alliance for Insurance Education and research. From their website www.scic.com
Return To Work Program (RTWP) Term Of The Day A Return To Work Program (RTWP) is one of my Five Keys To Cutting Your Workers
Term Of The Day – Disclaimer A Disclaimer flags an incomplete audit. An accountant or auditor’s statement which says the required audit was not complete.
Term Of The Day – Payroll Limitation For Workers Compensation, this limitation applies to executive officers and classifications with notes that indicate payroll limitation. The
Term Of The Day – General Exclusions General Exclusions cover unique exposures. In Workers Compensation, most employees are assigned one classification code. Certain operations
Certificate Holder-Workers Comp Term The Certificate Holder is the entity that actually purchased the policy from the insurer. They are shown on the certificate of
Transfer Of Right Of Recovery = Waiver A transfer of right of recovery for Workers Comp usually involves a very specific type of waiver. The
Partial Retention Can Reduce Premiums and Budgets The Partial Retention of a risk can be thought of as either using a deductible or an umbrella
Term Of The Day – Deposit Premium The Deposit premium is unique from regular insurance premiums, because they are refundable should either the insured or
Term Of the Day – “A” Rates When analyzing the premiums that very large deductible insureds pay their carriers, we often come across what is
Term Of The Day – Standard Exceptions The Standard Exceptions in a Workers Comp policy reduce premium payouts for the safer workers at a give
Term Of The Day – Scooping Ice Cream Scooping ice cream can be hazardous? Recently, an employee of an ice cream store had her claim
Endorsements Can Change Policy Many Times Policy endorsements change the policy as many times as the carrier wishes. Workers compensation policies may need some type
Term Of The Day – Due Diligence The Due Diligence is one of those overused terms in insurance, especially Risk Management. The term was started
Term Of The Day – First Named Insured The entity or person named first on the dec page of the policy. The first named insured
Deductible Plan – Workers Comp Term A Deductible Plan for Workers Comp comes in two basic sizes. The insurer retains all the claims handling responsibilities
Competitive State Funds Still Exist Across The US – Updated 2019 Facilities that are state owned and operated that directly compete with commercial carriers. The
Binder – Term Of The Day A binder can be used in WC, but is not recommended. A temporary but legal agreement that provides proof
Additional Insured-Workers Comp Term One of the most common additional insured is a subcontractor. The subcontractor may not have the proper insurance. The main contractor
Term Of The Day – Interstate Rating An Interstate rating cover a an experience modification factor across more than one state. These ratings are calculated
Term Of The Day – Loss Reserve Stability An actuary’s ability to project Workers Compensation loss reserve or pricing in the future is based upon numerous
Term Of The Day – Qualitative Claim Auditing Qualitative Claim Auditing refers to a review of claim files to explore the level of claims handling
Term Of The Day – Seasonal Risk A seasonal risk for Workers Compensation is when the workers are hired to work only certain times of
Third Party Administrator (TPA) Is Not An Insurance Carrier A firm hired to handle Workers Compensation claims by contract. Third Party Administrator (TPA) usually work
Term Of The Day – Underwriter An underwriter works under the radar most of the time. In the broadest sense, an underwriter is the person
D-Ratio Is Associated With Each Class Code D-Ratio is also known as the discount ratio. NCCI or your State Rating Bureau uses the discount ratio
Risk Avoidance-Workers Comp Term In Workers Comp the term risk avoidance refers to one of the most obvious way to reduce risk to the economy
Adjudication – Workers Comp Determination The Workers Comp term Adjudication is the process in which a judge examines the evidence, arguments and legal argument brought
Accident Year Data – Workers Comp Term Accident year data is often used for statistical comparison analysis. Most of the time when I have Accident
Policy Provisions – When Reality Hits The Policy Provisions trip up employers when filing claims. Even adjusters sometime have trouble with the policy terms. The
Term Of The Day – Prohibited Risk A Prohibited risk is any class of business that has been excluded by the underwriters of an insurance carrier.
Term Of The Day – Preferred Risk Preferred risk is any risk that is considered to be a better risk. These risks have a lower expectation
Net Loss Is The Final Countdown The term Net Loss is seldom used in Workers Compensation. The figure represents the final paid loss regardless of
Term Of The Day – Loss Constant In workers comp, loss constant is a flat amount added to the premiums of smaller businesses.The purpose of adding
Hazards Increase Work Comp Premiums Most hazards cause workers comp premiums to increase eventually. Any condition that increases the chance that there will be a
Term Of The Day – First Dollar Coverage The first dollar coverage in A WC policy is the norm. The type of insurance in which
Coinsurer-Term Of The Day This is sometimes referred to as pie chart insurance (coinsurance). One of the parties that provides additional insurance to the same
Unearned Premium-Workers Comp Term The unearned premium represents the portion of a Workers Comp Policy Premium that has been paid beyond the current period. The
Term Of The Day – Wrap Up Policy Also known as a Contractor and/or Owner Controlled Insurance Policy, a Wrap Up Policy is a single policy
Term Of The Day – Risk I.D. # An employers Risk I.D.# is assigned by it’s rating organization. Each employer’s Risk I.D. # is uniquely it’s
Term Of The Day – Ballast Value The Ballast Value comes from an old sailing term. Sailors were known to put large rocks in the bottom
Term Of The Day – ERM ERM is the acronym for Enterprise Risk Management. A Practice that attempts to ensure the risk position of a
Explanation of Benefits (EOB)-Term Of The Day The Explanation of Benefits (EOB) is a new term in the Workers Compensation industry. Until recently, EOBs were
Retaliatory Employment Discrimination Act Is Important The Retaliatory Employment Discrimination Act involves Workers Comp in certain cases. The Department of Labor’s Employment Discrimination Bureau (EDB)
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