Automated Workers Compensation Reserves Area Of Concern
The Automated Workers Compensation reserves by carriers and TPA’s cause me much concern. Automated reserving is an area of Workers Compensation reserving with certain insurance carriers or TPA that causes me great concern.
I have actually been told more than once by a Workers Comp adjuster that the reserves (no matter how inaccurate) could not be changed as their computer system had set the reserves and they are 99% accurate. I have never seen anything involving insurance that was 99% accurate.
Automated reserving is basically fill-in-the-blanks adjusting. As everyone’s healing period varies greatly, there is no “one-size-fits-all” estimation of the files reserves. As each injured worker is very unique, so should be the reserves on the file. For instance, say that an employee fractures their arm and will be off work for quite some time. The only way that the reserves can properly be set is with the experience of the adjuster at how much it will cost during the lifetime of the file.
However, there are some reserving systems that do not even allow changes to the preset reserves unless a very important development occurs on the file. There are even some automated reserving systems that only allow for a supervisor to make changes after the adjuster has set the initial reserves – usually at 60 days into the file.
Automated reserves are not the same as an online adjuster’s reserve worksheet. The adjuster can input anything needed to properly estimate the file reserves with an online worksheet. Automated reserves ask very unspecific questions and then semi-magically come up with the reserves. If your company has online access to the claims files, you may be able to see the documentation on the reserving. If you have this type of access, the adjuster worksheets may answer quite a few questions.
I am not saying that all automated reserving programs are inaccurate. Unfortunately, I have not seen one that can forecast a person’s genetics. It may be a good idea to ask your adjuster if they use automated reserving software. If so, these reserves should be followed very closely.
There are two different software packages that will automatically set the reserves. Due to legal concerns, I will not mention them here. There is one monopolistic state that still uses this type of software to set reserves.
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