For most employers workers compensation claims drive premium. They cause increased experience modification rates, increased retro adjustments along with other effects which drive premiums up. To understand the relationship between claims and the premium you pay is just the starting point. How can you identify a claim problem? Let’s find out!
To begin you must know about your workers comp claims. You must be able to identify each and every claim, injured employee and exposure situation that caused the injury. You must gain knowledge about the dollars paid and remaining reserves applied to each claim case. This information is found on your workers compensation loss runs.
Loss runs are a compilation in timeline format of all the claims your company has been charged with by each individual insurance company where you’ve had a workers compensation policy. They are a record of claim dollars paid for each case. They are a snap shot of your claims data as reported to and used for computing your experience rating factors and retrospective rating adjustments. They are the first place you should look when evaluating the claims experience of your company!
Workers compensation loss runs are available from your insurance company. If you’ve never seen one then you need to contact your insurance agent or broker and ask them to provide you with a copy. For a sophisticated employer, one who may have a risk management department or internal insurance personnel on staff, loss runs are a matter of every day life. But a smaller employer, one who may be on their own without help, may have never even seen one.
You see, there’s a bit of a stigma in the world of insurance brokers and agents when it comes to providing loss runs to their clients. Usually, for a smaller employer, the only time they ask for a loss run is when they are quoting their business out to other agents. It’s common knowledge that when asking for quotes from other agents the new agent will need to know all about the claims experience for proper placement and pricing of coverage. Funny thing about this is that loss runs should be provided to every client, large or small, at least once a year if not more often! It’s a tool!
Once you’ve received your loss runs take a look for:
- Older claims that remain open with no activity;
- Claims with little activity that still show reserves;
- Claims that you know have been settled but are still showing active reserves;
- Claims that are unknown to you;
- Claims that are medical only;
- Claims with large dollar reserves and little paid;
- Frequency of claims by specific individuals;
- Frequency of claims by location;
- And there’s more….
If you can identify any of these situations you may have just stumbled over a claim problem, one that needs further investigation. Claims can be complex and the existence of errors and mistakes in proper claim handling procedures can and do lead to over paid premiums.
Here’s a few things to consider:
- Should the claim have been paid at all? It’s not uncommon for a workers compensation claim to be paid when in fact it should not have been.
- Did the insurance company properly investigate the claim? Claim departments have a tough job, no doubt about it. But if they make a mistake and pay a claim that should not have been paid, the employer will suffer the consequences of paying higher premiums.
- Was the claim handled properly? Could there have been a more efficient result in the handling of a claim by the insurance company and if so would there have been less dollars spent ultimately resulting in less cost and less impact on the employers premium? Were reserves left open and not resolved?
- Were proper data reporting procedures followed? Did the insurance company properly manage and report updated claim data to the rating bureau?
- Were proper reserving practices followed? Was the claim correctly reserved and were reserves reduced in accordance with claim settlement?
Enough!! I think you get my point. If you’ve identified any claim activity on your loss runs maybe you should consider having them looked at by an outside consultant. You might be surprised at the number of mishandled claims that occur which ultimately result in higher premiums paid!
Hope this helps out!