Doing A Big File Review Can Cost Your Company

Wednesday, September 10, 2008 | 0

By James Moore

Our clients often ask us if a meeting with the workers' comp claims adjuster on all files is a good idea. As I have posted recently in the past few blogs, it is a good idea to be very prepared before the file review. The adjusters reserves are being reviewed, but the other side of the coin is that often an adjuster will review all files before meeting with you. There may be files where a reserve increase in indicated costing your company more $ than you may actually save with a file review.

Not all files need to be reviewed. In fact reviewing certain files may cost more premiums than if no files are reviewed. As I posted in the last post, BE PREPARED. Covering the files that have high reserves is your mission, not covering the files where the reserves are low and need to be increased. Remember, your premiums are based on Total Incurred. Total Incurred on a file is the Paid + the Reserves (Total Incurred = Paid + Reserves). There is little you can do about the paid amounts on a files as the funds have been spent. The area to zero in on with a laser-like examination is the open reserves.

The key is to know which files to review and which ones to leave alone. The adjusters will eventually get around to adjusting the reserves on all of your files. However, you do not need to point them out to the claims staff. Timing your reserve review on your Unitstat cycle is also critical. Please see our other posts on the Unistat date.

How do you know which Workers Comp file review to examine? As I posted previously, it takes an adjuster about five to seven years to feel comfortable with setting reserves on files. Can your agent help you? Yes, if they have a claims background, which is HIGHLY unusual or if they have a good experienced claims analyst on staff. That is also very rare.

Calling in a workers' comp premium auditor and a claims expert may be a good idea. In a recent survey, the premium dollars saved (return on investment) is about $6 in premium savings to $1 in fees paid to a premium auditor or claims expert.

James Moore is founder of J&L Risk Management Consultants, a Raleigh, N.C. firm that consults with employers to reduce workers' compensation costs. This column is reprinted with his permission from his blog, http://www.cutcompcosts.com/www/blog.html