I cannot emphasis enough the importance of implementing a workers compensation claim review program. And for businesses who have an experience modification rate, XMOD, EMOD or EMR over 1.0 it’s even more critical that this action be taken!
A workers compensation claim analysis is an independent, outside evaluation of an employers current and past claim and claim reserves as established by their insurance company. For an employer, claims and their reserves have a direct effect on:
- The EMR or experience modification rate;
- The premium or cost of a policy;
- The ability to secure a future policy;
- The ability to secure future jobs or work for their company;
- The ability to maintain current job contracts;
- And, in some cases, the future solvency of an employers company.
For the experience rated employer perhaps the least critical effect of these may be the additional cost of their policy.
Claims and reserves equate to dollars an insurance company has or will in the future pay out for an injured employee. This is the point where workers comp benefits, as outlined in state statute, and the cost of an employers policy meet.
Insurance company claim departments make mistakes! They pay claims they shouldn’t have. They mishandle claims in a variety of ways. They over reserve claims waiting for payment. They leave claims open and on the books when they should be closed and they overpay legitimate claims every day. Unmonitored claim activity can lead to inappropriate claim payments made by the insurance company on behalf of the employer. Each of these actions will have a negative effect on an employers experience rating and EMR.
For those employers, mostly involved in the construction industry, who have job contracts that require an EMR of 1.0 or less, a claim review program is mandatory! For some it may only take a few inappropriate claims to drive their EMR over 1.0 causing them to lose existing contracts or not be able to bid on additional work. Sadly, we’ve seen this situation cause businesses to shut their doors!
Who can benefit from a claim analysis and review program?
- Insurance Agents and/or Agencies – You should provide this service as a benefit for your policyholders. Especially those clients who may have contractual obligations to maintain their EMR below 1.0.
- Attorneys and their Clients – Many of your business clients struggle with insurance company claim and claim reserving practices and the ultimate effect these have on their bottom line. They end up on your door step seeking assistance when they’ve been presented with outrageous retro adjustments or some other adverse effect of the claims process.
- Business Owners, The Employer – Don’t wait! Once an experience modification rate is out of control, a quick fix is nearly impossible. Every employer should have a claims review conducted. There’s little reason not too. And if your business is large enough or your business relies on maintaining a lower than 1.0 EMR, implement a claim review program.
Claim and claim reserve reviews are a very important process in proper management of any workers compensation program. The certainly become more important for those employers who are involved in a retrospective rating plan or are simply experience rated.
Hope this helps you out!