Claim Reserve Audit Review For Workers Compensation

While workers compensation claim reserves have always had a direct impact on workers comp premium, split point changes in experience rating calculations will only increase the effect claim reserves have on premium an employer pays. Current changes in the split point of experience modification rate calculations will have a significant effect on the premium of those employers who have poor loss experience and claim frequency problems. It now becomes even more important to have an independent claim reserve review performed!

A claim reserve review may uncover problems with insurance company reserve and claim handling practices that add direct cost to the employers bottom line through their effect on the experience rating calculation. 

Answer these questions:

  • Did you know when a claim occurs, the insurance company establishes a “reserve” on the claim? This is the amount the insurance company feels they will have to pay for the claim. It’s setup before they even have to pay $1!
  • Did you know that claim reserves are treated as payments made? Reserves and reserving practices are key in budgeting potential dollars paid out over the life of an open claim.
  • Did you know that claim reserves are reported to the advisory rating organization and used in the calculation of your experience modification rate? Reserves are treated in the calculation of your EMR as already paid dollars.  
  • Do you have a workers compensation claim frequency or severity problem? For experience rated employers every claim dollar spent will have an impact on the premium you pay.
  • Is your experience modification rate, EMR, a factor greater than 1.0? If so, because of split point changes you may see a direct increase to your experience mod rate. 
  • Does your workers compensation claim experience contain errors? Approximately 65% of workers comp claims do contain errors. Many claim errors and mistakes inflate reserving and the ultimate cost of a claim.
  • Are your claim settlement and reserving practices handled properly? Up to 95% of workers comp claims are overpaid or otherwise handled improperly, driving the cost of the claim up and negatively impacting the employers experience rate!

An Independent Claim Reserve Review will:

  • Identify claim over-reserving practices;
  • Discover claim handling mistakes and errors;
  • Is the starting place for a proper review of your experience modification rate;
  • Validate experience data that’s used in the calculation of an experience rate factor;
  • Provide support when disputing statistical data becomes necessary;
  • Provide litigation support for legal action involving reserve and claim handling practices; 
  • Be a valuable tool for experience rated employers or those employers with retro plans;

Of course there are other important reasons that an employer should have an independent claim review conducted.

If you have any questions about how a claim review may help your business or if you would like to inquire about our claim review service, just email or contact our office!